If you’re dealing with bankruptcy in Canada and worrying about how it could affect your immigration status, you’re not alone. This is a common concern, and understandably so. The good news? Bankruptcy does not automatically block you from living, working, or becoming a permanent resident in Canada.
That said, there are important rules and practical hurdles to be aware of, especially when it comes to permanent residence and family sponsorship. This guide breaks everything down, so you know where you stand and what to plan for.
Jump to:
- Key takeaways: Bankruptcy and Canadian immigration
- Does bankruptcy affect your immigration status in Canada?
- Can you get or keep a work permit while bankrupt?
- Does bankruptcy affect study permits?
- Bankruptcy and Permanent Residence (PR) in Canada
- Bankruptcy vs Consumer Proposal: Immigration differences
- Bankruptcy and family sponsorship in Canada
- Does bankruptcy affect Canadian citizenship?
- Bankruptcy and Canadian immigration FAQs
- Get professional debt help with Harris & Partners
Key takeaways: Bankruptcy and Canadian immigration
Bankruptcy does not automatically derail your immigration plans in Canada. But it does change how you need to approach them.
Here’s what matters most:
- You can hold a work permit and apply for permanent residency while bankrupt
- Proof of funds is the biggest hurdle for most applicants
- Family sponsorship is not allowed while undischarged
- Citizenship eligibility isn’t affected by bankruptcy
Are consumer proposals a better option?
For many people dealing with immigration and debt at the same time, a consumer proposal can feel a lot more manageable than bankruptcy. While it’s still a legal process handled by a Licensed Insolvency Trustee, you’re not considered bankrupt. Here’s why that works to your advantage:
- You’re actively repaying part of what you owe, which can come across as more responsible than being bankrupt.
- You can keep your accounts and assets, which can help when proof of funds is required.
- Unlike bankruptcy, consumer proposals don’t put sponsorships on hold until you’re discharged, so your family plans don’t have to be put on pause.
- You know exactly what you’re paying each month thanks to clear, fixed payments that make it easier to plan around rent, fees, and other everyday costs.
- You can keep working, renew work or study permits, and apply for permanent residence while your debts are being dealt with in the background.
Did you know? An average of 361 Canadians per day turned to formal debt solutions in January 2025, often choosing consumer proposals as a more flexible alternative. Speak with a Licensed Insolvency Trustee now to see how they can help with your debt problems.
Does bankruptcy affect your immigration status in Canada?
Bankruptcy does not directly affect your immigration status in Canada. Canadian immigration law treats bankruptcy as a financial matter, not a criminal one. Unlike questions around fraud or criminal convictions, immigration applications do not ask whether you’ve filed for personal bankruptcy in Canada.
This means:
- You can legally remain in Canada while bankrupt
- You can apply for immigration programs
- Bankruptcy alone is not grounds for refusal
Where things get more nuanced is how financial requirements work with immigration rules. This is where many applicants run into trouble—not because of bankruptcy itself, but because of how it affects access to money and assets.
Can you get or keep a work permit while bankrupt?
Yes. Bankruptcy does not prevent you from applying for or holding a Canadian work permit.
Immigration, Refugees and Citizenship Canada (IRCC) does not review your credit score or insolvency status when assessing work permit applications. From an immigration standpoint, bankruptcy and work permits are separate issues.
If you already have a work permit, filing for bankruptcy does not cancel it. The same is true for consumer proposals, which generally involve even less disruption to employment and permit renewals.
What employer restrictions should you be aware of?
While the government won’t deny a permit because of insolvency, some employers might.
If you work in a position of trust—such as banking, accounting, insurance, or senior financial roles—your employer may require a clean credit check. In those cases, bankruptcy could affect your employment, even though your immigration status remains intact.
This is an employment issue, not an immigration one. Still, it’s an important part to understand.
Does bankruptcy affect study permits?
No. Bankruptcy does not affect eligibility for Canadian study permits either.
As with work permits, IRCC does not assess your credit history. However, students should be mindful of funding requirements, as tuition and living expenses must still be covered during your studies.
Some students find a consumer proposal easier to manage than bankruptcy, since it allows them to retain access to savings needed for tuition and living costs.
Bankruptcy and Permanent Residence (PR) in Canada
When it comes to bankruptcy, the matter of permanent residence is where most of the confusion comes in.
Can you apply for PR while an undischarged bankrupt?
Yes, you can.
You are allowed to apply for permanent residence in Canada even if you are an undischarged bankrupt. There is no question on PR applications asking about bankruptcy, unlike questions about criminal history or misrepresentation.
Many people successfully receive PR while in bankruptcy. However, approval often hinges on how you’re applying.
The ‘proof of funds’ requirement explained
Certain immigration programs require applicants to show they have enough money to support themselves and their family after arriving in Canada. This is commonly referred to as proof of funds or settlement funds.
This requirement applies to programs such as:
- Express Entry (Federal Skilled Worker stream)
- Some Provincial Nominee Programs
The funds must be:
- Readily available
- Unencumbered (i.e. fully yours to use, no strings attached)
- Not borrowed
Under a consumer proposal, funds in your bank account remain under your control, which can make it easier to meet these requirements compared to bankruptcy.
Why bankruptcy can lead to PR refusals
When you file for bankruptcy, any non-exempt assets automatically pass into the legal ownership and control of the Licensed Insolvency Trustee under the Bankruptcy and Insolvency Act. Once that happens, those assets are no longer legally yours to use or control.
If IRCC determines that:
- Your money is tied up in the bankruptcy estate, or
- You don’t have unrestricted access to the required settlement funds
Your application could be refused.
Importantly, this refusal would be financial, not legal. The issue isn’t that you filed for bankruptcy; it’s that you can’t demonstrate access to qualifying funds.
When proof of funds is not required
There is some good news here.
If you are applying under the Canadian Experience Class (CEC) or you have a valid job offer, the proof of funds requirement is usually waived. For these applicants, bankruptcy is far less of an obstacle to permanent residence.
This is why timing and program selection matter so much. Two applicants with identical financial situations can have very different outcomes depending on how they apply.
Bankruptcy vs Consumer Proposal: Immigration differences
For immigrants, the difference between bankruptcy and a consumer proposal can be significant.
A consumer proposal allows you to:
- Keep control of your assets
- Continue managing your bank accounts
- Avoid the legal restrictions placed on undischarged bankrupts
From an immigration perspective, this often makes it easier to:
- Demonstrate access to funds
- Avoid sponsorship restrictions
- Maintain financial stability during the immigration process
This is why many people exploring bankruptcy and Canadian immigration are encouraged to look at potential alternatives like consumer proposals before filing.
Bankruptcy and family sponsorship in Canada
When it comes to family sponsorship, bankruptcy has a much bigger impact than it does on work permits or permanent residence. If you’re planning to sponsor a spouse, partner, parent, or grandparent, it’s important you understand these rules before applying.
Can you sponsor a family member while bankrupt?
If you are an undischarged bankrupt, then no. Canadian immigration law clearly states that someone who is currently bankrupt cannot sponsor a family member. This applies to:
- Spousal and partner sponsorship
- Sponsoring parents or grandparents
It doesn’t matter how close the relationship is or how strong the application may otherwise be. If you have not yet received your Order of Discharge, IRCC will refuse the sponsorship application.
Why does bankruptcy block sponsorship?
Sponsorship comes with a serious financial commitment. When you sponsor someone to come to Canada, you sign an undertaking promising that you can financially support them for a set period of time.
An undischarged bankruptcy suggests that:
- You are not currently able to meet financial obligations
- Creditors are being repaid through the bankruptcy process
Because of this, immigration rules consider you unable to take on extra financial responsibility until the bankruptcy is complete.
When can you sponsor again?
Once you receive your Order of Discharge, the restriction is lifted.
At that point, you can:
- Submit a new sponsorship application
- Be assessed like any other sponsor
- Move forward without bankruptcy acting as a barrier
Timing matters here. Applying as a sponsor even a few weeks too early can result in delays or refusal.
Sponsoring with a consumer proposal
If you file a consumer proposal instead of bankruptcy:
- You can sponsor a family member
- Sponsorship restrictions do not apply
- You remain eligible while making proposal payments
For many people, this alone makes a consumer proposal a better option if immigration and reuniting with family members are a priority.
Does bankruptcy affect Canadian citizenship?
No, bankruptcy has no impact on your ability to become a Canadian citizen. You can apply for citizenship even if you are:
- Currently bankrupt
- Undischarged
- Paying a consumer proposal
Citizenship applications do not include questions about bankruptcy or credit history. As long as you meet the residency, language, and tax-filing requirements, bankruptcy will not prevent approval.
Bankruptcy and Canadian immigration FAQs
Can I sponsor my spouse after bankruptcy in Canada?
Yes, but only after you receive your discharge. If you are an undischarged bankrupt, you cannot sponsor a spouse or partner. Once discharged, you can apply normally.
Does bankruptcy make you inadmissible to Canada?
No. Bankruptcy is a financial issue, not a criminal one. It does not make you inadmissible and does not appear as a question on immigration applications.
Can I apply for PR (permanent residence) while in a consumer proposal?
Yes. A consumer proposal does not restrict permanent residence applications and does not carry the same limitations as bankruptcy. In many cases, it is easier to meet financial requirements under a proposal.
Does IRCC check your credit score?
No. IRCC does not review credit reports or credit scores. However, they may assess whether you meet financial requirements, such as proof of funds, depending on the immigration program.
How long after bankruptcy can I sponsor someone?
You can sponsor a family member as soon as you receive your Order of Discharge. Until then, sponsorship applications will be refused.
Get professional debt help with Harris & Partners
Dealing with debt while trying to protect your immigration, permanent residence, or sponsorship plans can be a lot to juggle. This is where speaking with one of our Licensed Insolvency Trustees can help. For more than 50 years, our multi-lingual team has been helping Canadians across nine provinces understand their rights, responsibilities, and opportunities when it comes to managing debt, and now it’s your turn.
The right plan—whether that’s bankruptcy or a consumer proposal—can save you time, money, and stress later. Call our team or book your free consultation now for clear, judgment-free advice.
