Options for Dealing with Debts
Bankruptcy should be considered once you have ruled out other, less drastic, measures for solving your financial challenges. For many people, a Consumer Proposal is a better option for both them and their creditors as it allows for a realistic compromise to be worked out whereby a person avoids bankruptcy and debt creditors receive a greater return by agreeing to abide by the terms of the Consumer Proposal. Please review our section on Consumer Proposals for further details.
Other options available to you for consideration include:
- Contact your debt 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 willing to cooperate.
- 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 monthly payments to that debt creditor. Make sure that you shop around because interest rates vary. Avoid further credit purchases because this could increase your debt load and make the consolidation loan too difficult to handle.
- Informal Proposal: In some cases, we can work with you and your creditors to set up a payment plan that allows you to pay your debt creditors in an orderly way, thus helping to preserve your credit rating. This operates similar to a debt consolidation loan, except that 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 for you to pay off the indebtedness in full. The counsellor will review your financial situation and arrange a payment program between you and your debt creditors. A fee may be charged by the counsellor in order to perform this service.
- Consumer Proposal: Under the Bankruptcy and Insolvency Act, a Trustee files a proposal, which is an arrangement between you and your creditors that allows you to 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, you must offer your creditors more money than what they would expect to receive in a distribution under a bankruptcy.