If you are dealing with overwhelming debt, bankruptcy may not be the only solution available to you. Start by understanding the reality of bankruptcy and the alternatives available.

Contact your creditors to manage your debt

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 will cooperate when presented with a plan and a payment schedule.

Consolidate your debts into a single loan with a low interest rate

You can approach a bank or credit union about combining, or consolidating, your debts into one loan. The bank or credit union issuing this new loan then pays off all your debts and, in return, you make a monthly payment to them. Make sure you shop around—interest rates vary. Be sure you close the accounts for the old debts so there is no chance you can use them again! Avoid further credit purchases, as this could make your debt load too great for you to handle.

Learn more about consolidation loans.

Consumer proposal as a bankruptcy alternative

A consumer proposal is an offer to your creditors to repay a portion of the debt you owe. Once accepted, consumer proposals can provide fixed and lower payments. This means that you could make a single, interest-free payment each month that’s based on what you can afford. A reduced monthly payment, spread out over a maximum of five years, allows you to keep your assets, stay consistent, and find financial freedom. Many see their debt reduced by up to 80%.

To be acceptable, your creditors must be better off under a proposal than if you go bankrupt. Each of your creditors then has the opportunity to accept or reject what you are offering.

Learn why consumer proposals are becoming the more attractive option for debt relief in Canada.

There are two types of proposals an individual can file:

  1. Consumer Proposals
    A person is eligible if their aggregate debts, excluding debts secured by a principal residence, do not exceed $250,000. The payments that you would make in the consumer proposal cannot be for more than five years. If the creditors do not accept the proposal you are not automatically bankrupt. You must attend two mandatory counselling sessions.
  2. Other Proposals
    There is no restriction on the amount a person owes and payments are not restricted to a five-year period. If the creditors do not accept the proposal, you are automatically bankrupt as of the date that the proposal was originally filed.

Learn more about consumer proposals and how it could work for you.