Alternatives to Bankruptcy

Debt Consolidation

You may approach a bank or other financial institution about “consolidating” your debts into one loan. If you have canvassed the market for the best interest rates, you should be able to reduce your overall monthly interest payments and simplify the payment process. However, you may be required to either pledge some of your assets for collateral or alternatively, require a co-signer.

Informal arrangements with creditors

You may without the aide of a Trustee, attempt to negotiate a settlement or new payment terms with your creditors. However, unless these arrangements are formally documented, they may not be contractually binding on all parties. In this respect, until a settlement is actually reached, creditors are free to continue with legal enforcement proceedings.

Proposals to Creditors

A proposal is a mechanism under the Bankruptcy and Insolvency Act (hereafter referred to as the “Act”) that allows individuals to make a formal “proposal” to one’s creditors. The proposal typically provides for a reduction of debt and/or extension of time with a lump sum or stream of payments made to the Trustee or administrator under the proposal. The Trustee or administrator will thereafter distribute the payments to your creditors as per a defined schedule. Successful completion of a proposal will discharge those debts included under the proposal (with the exception of those debts which survive the process under section 178 of the Act).