Alternatives to bankruptcy

Contact your creditors

Explain why you are not able to make your payments and suggest an arrangement that could work for both you and your creditors. You just might be surprised to find that many creditors are willing to co-operate.

Consolidated loan

You can contact a bank or another financial institution to consolidate all your debts into one loan. This creditor pays  all your debts, and in return, you make one monthly payment to one creditor. Take the time to “shop” for your loan as interest rates may vary considerably. Avoid all purchases on credit. This could compromise your already fragile situation.

Informal proposal

Under certain circumstances, we can or you yourself can work with your creditors to come up with a payment scheme that would allow you to reimburse your creditors, thus preserving your credit rating. This is similar to a consolidated loan except for the fact you have not made a loan   to reimburse your creditors.

Consolidation order

If you live in BC, Alberta, Sask, Man, NS or PEI, you may apply to the courts for a certificated order. A consolidation order determines the amount and periodicity of payments to the court. The court will in turn pay your creditors. This section of the Bankruptcy and Insolvency Act (Section X) allows you to pay off your debts over a period of 3 years and protects you from seizure of salary or any other measure that could be imposed.

Voluntary deposit

For residents in Quebec, voluntary deposit allows for a monthly payment based on your revenue and number of dependents. This payment is made to the court, who in turn pays your creditors. As long as payments are made, you are protected from seizure of salary and furniture. Register at the nearest courthouse in your local jurisdiction.

Proposal

Pursuant to the BANKRUPTCY AND INSOLVENCY ACT, a trustee or an administrator makes a proposal to your creditors in which you pay only a part of your debts or  you can prolong the period of payment of your debts  or a combination of both. For this to work, the offer must benefit your creditors more than a bankruptcy.

There are two types of offers available:

  • Consumer proposal”: a person is eligible if their total debt, excluding the debt attributed to the main residence, does not exceed $250,000. The proposal cannot exceed a term of more than five years. If the proposal is not accepted by the creditors, the debtor does not automatically go bankrupt.
  • Proposal“:There are no restrictions on what a person owes. If the creditors refuse the offer, the person is automaticallly bankrupt from the date of refusal by creditors or the court.

If these alternatives are not plausible and financial woes are crippling you, then bankruptcy may be the only way for a new start in life.

One

of the main objectives of the banruptcy legislation is to provide a person, drowning in debt, the possibility to rid themselves of debt and start over again: a new beginning.

 

Individual agreements

If the situation is not too critical, the debtor can contact each of their creditors individually to try and reach an agreement. Each agreement is independent of the others reached with the other creditors.

Even if a debtor manages to reach an agreement with most of their creditors, those creditors who refuse retain the right to all civil action required to collect their debts. This includes the adjudication order for seizure of salary, furniture and furnishings, a situation that might render the debtor unable to fulfill their agreements with the other creditors. 

Voluntary deposit

Orderly Debt PaymentVoluntary deposit is a free measure provided by the Code of Civil Procedure.To register for Voluntary Deposit, you must file a declaration at the Court of Quebec at your nearest courthouse.An official for the voluntary deposit office will notify each creditor that the debtor has registered with the voluntary deposit plan.This procedure assumes that the debtor will deposit the seizable portion of his salary each week at the courthouse where the official in charge will make a payment every three months to the debtor’s creditors. The debtor is obliged to pay the total amount of debt, in capital, interest at the legal rates and costs ( incurred by the creditors before the voluntary deposit).As long as the debtor honours this agreement, in that said person deposits the seizable portion of their salary, the debtor’s creditors do not have the right to seize their salary, furniture or furnishings.The portion of salary that may be seized varies between 20% and 30% of the gross salary, depending on the number of dependents. This amount is not tax deductable.In closing, the amount the debtor is obliged to pay is equivalent to what the creditor would collect by seizing their salary.