Alternatives to bankruptcy

Contact your Creditors

Explain why you cannot make your payments and suggest an arrangement that could work for both of you. You may be surprised that many creditors are more than willing to co-operate.

Debt Consolidation Loan

You can approach a bank or financial institution about combining or "consolidating" your debts into one loan. This creditor pays off all your debts and, in return, you make a monthly payment to that creditor. Make sure you shop around - interest rates vary. Avoid further credit purchases; this could make your debt load too great for you to handle.

Informal Proposal

In some cases we can work with you and your creditors to set up a payment plan that will allow you to pay your creditors in an orderly way and thus help preserve your credit rating. This operates similar to a debt consolidation loan except you do not borrow the money to pay off your creditors.

Consolidation Order

If you live in Alberta, Saskatchewan, Manitoba, Nova Scotia or Prince Edward Island you may apply for a Consolidation Order. A Consolidation Order sets out the amount and the times when payments are due to the court. The court will distribute your payments to your creditors. This part of the Bankruptcy and Insolvency Act (Part X: Orderly Payments of Debts) lets you pay off your debts over three years and frees you from creditor harassment and wage garnishment.

Voluntary Deposit Scheme

For residents of Quebec, the Voluntary Deposit scheme (better known as the "Lacombe Law") is similar to a Consolidation Order. You must make a monthly payment based on your income and number of dependants to the court. This service is usually available at the local courthouse.

Proposals

Under the Bankruptcy and Insolvency Act, a trustee or an administrator files a Proposal or an arrangement between you and your creditors to have you pay off only a portion of your debts, extend the time you have to pay off the debt, or provide some combination of both. To be acceptable, your creditors must be better off under a Proposal than if you go bankrupt.

There are two types of Proposals an individual can file:

"Consumer Proposals" - A person is eligible if his aggregate debt, excluding debt secured by a principal residence, does not exceed $75,000. The consumer proposals cannot be for more than five years. If the creditors do not accept the Proposal the debtor is not automatically Bankrupt. Counselling is required.
"Other Proposals" - There is no restriction on the amount a person owes. He can owe less or more than $75,000 to be eligible. If the creditors do not accept the Proposal the person is automatically bankrupt effective on the date of the Creditors' Meeting or the date the court rejected the Proposal. If the proposal is accepted counselling is not required.

If these alternatives will not work for you, and you're feeling "boxed in" bankruptcy may be the only way for you to get a fresh start.

One of the main purposes of bankruptcy legislation is to afford the opportunity to a person, who is hopelessly burdened with debt, to free himself of the debt and start fresh - "a new lease on life."

Alternatives to bankruptcy

For more information please refer to our pages:

Personal Proposals - Avoiding Bankruptcy; or

The Most Common Questions asked about Personal Bankruptcy.

Overview:

Bankruptcy Information: