“Going Bankrupt and Rebuilding Credit in Canada” is a series written by Common Cents Mom (Hollie Pollard) who, in her own words, “really had no sense when she was young but she is a fast study and is learning that you can recover from financial mishaps.” Hollie shares what she is learning and doing on her blog Common Cents Mom.
Consolidation and Other Alternatives to Bankruptcy
Yesterday I shared what lead me to declare bankruptcy very recently. The road was long and when I finally made the choice that I wanted a second chance at real financial health I had to look at the options. The bankruptcy laws here in Canada are there to give people a second chance and I am thankful for mine but before I decided on declaring bankruptcy I did look at the other options.
There are several other options before bankruptcy:
First you can contact your creditors and see if they are willing to work out a better payment plan for you at perhaps a lower interest rate. This one I recommend if you are a little behind and have had a decent history of paying your bills.
If you live in Alberta, Saskatchewan, Manitoba, Nova Scotia or Prince Edward Island you could think of a consolidation order. A Consolidation Order sets out the amount and the times when payments are due. You pay the court and they pay your creditors. This part of the Bankruptcy and Insolvency Act. You have only 3 years to work with this method though but it does get rid of any garnishees.
If you live in Quebec, the voluntary deposit scheme is similar to a Consolidation Order. You must make a payment based on your income and number of dependents to the court. This service is usually available at the local courthouse.
There are two types of proposals an individual can file:
- Consumer Proposal: Your debt must total more then $75,000. You have to be able to pay it back within 5 years. Counseling is required. If you do not meet your obligations you are automatically bankrupt.
- Other Proposals: There is no restrictions on what you owe. It can be more or less then $75,000. There is a creditors meeting and if your creditors do not agree, you are bankrupt as of that date. No counseling is required.
Now if none of these are working for you or you feel like I did, totally weighed down by huge debt, it may be time to think about bankruptcy and get that fresh start that the bankruptcy act wants us to have. There will be more about what is bankruptcy and what to expect when meeting with a trustee next post.