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 as 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.

Private Debt Counsellors

There are a number of private debt counsellors who will make arrangements with your creditors to pay off your indebtness in full. The counsellor will review your financial situation and arrange for a payment program to be made between you and your creditors. A fee may be charged by the counsellor in order to perform this service.

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:

1. "Consumer Proposals" – A person is eligible if his aggregate debts, excluding debts secured by a principal residence, do not exceed $75,000. The consumer proposal cannot be for more than five years. If the creditors do not accept the Proposal the debtor is not automatically Bankrupt. Counselling is required.
2. "Other Proposals" – There is no restriction on the amount a person owes. If the creditors do not accept the Proposal the person is automatically bankrupt effective as of the date of the creditors meeting. 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."

Also see our pages on:

• FAQ – Questions & Answers
• Personal Proposals – Avoiding Bankruptcy

If you have any questions, please do not hesitate to contact any of our offices.