Ontario Bankruptcy Alternatives & Options
What are the Bankruptcy Alternatives in Ontario?
Bankruptcy can be right for some people, but it is a drastic choice that should not be the first option that you consider.
It’s important to take a look at all of the debt relief options and bankruptcy alternatives before you decide if bankruptcy is the choice that you should be making.
If you are considering bankruptcy in Ontario, you should take a look at the other options to see if they might be better for your financial situation.
It can even be possible to combine more than one debt solution if there isn’t one that offers you the perfect way to deal with your debt.
Why Consider Alternatives to Bankruptcy?
If you’re starting to think that bankruptcy might be the only way out of your debt obligations, why should you consider the alternatives first?
While there are some ways that bankruptcy can help you, there are also things that bankruptcy can’t do.
It’s not always the best solution when you are struggling to pay for your debts.
Ontario residents should be aware that there are certain types of debts that are not erased through bankruptcy, including secured debts, student loans that are less than seven years old, and child support and alimony debts.
Bankruptcy is not a quick fix to your money problems.
It is a big decision that has consequences, and it’s essential to understand the effects it will have on your finances both now and in the future.
Bankruptcy should really be a last resort when you are having problems with debt.
It’s important to explore the other options that are available to see if there is a solution that would suit you better.
The other debt solutions might not be easier, but one of them could be more suitable for your financial situation.
What Are the Main Options?
There are several debt solutions for you to consider if you’re looking for alternatives to bankruptcy.
Some of the key options that you have available are:
- Credit counselling;
- Debt consolidation and repayment;
- Debt settlement;
- Consumer proposal.
Each of these options can help you to avoid bankruptcy so that you can deal with debts and get your finances back on the right path.
They are offered by different professionals, depending on what type of debt solution you choose.
Credit counsellors can help you with a debt management plan, while you need to use a Licensed Insolvency Trustee if you want to file a consumer proposal.
Let’s take a closer look at some of the alternatives to bankruptcy in Ontario.
Credit counsellors can offer you advice about how to manage your money, including creating a budget that helps you to pay your expenses.
If you file bankruptcy, you will be required to take two credit counselling sessions, but you don’t need to become bankrupt to benefit from credit counselling sessions.
A credit counsellor helps you to improve your financial situation, whether that means helping you to budget your money better, deal with your debts or address concerns about your credit.
Credit counsellors can become accredited, so you may want to look for an accredited counsellor if you want someone who is committed to learning how to be the best.
Debt Consolidation and Repayment
One of the options that you can use for dealing with debt is debt consolidation.
This is an option that a credit counsellor might be able to help you with.
Consolidating your loans allows you to put them into one payment, making them easier to manage.
For some people, this is a sensible solution if they are able to create a budget that helps them to cover their expenses.
Debt consolidation can reduce your stress, and it could save you money by reducing the amount of interest that you pay.
A credit counsellor can help you with debt consolidation through a debt management plan.
With a debt management plan, your credit counsellor will help you to consolidate your unsecured debts into one payment that you can afford.
They can reduce the interest rates on your debts, often to zero, so that you don’t have to pay as much toward your debts.
Each month, you will make a payment to your credit counselling service, and they will distribute the money to your creditors.
Your debt will be paid off in five years but may be paid faster.
Debt settlement is another option that you could use to deal with your debts.
It allows you to use a company to create a repayment plan to pay off just part of your debts.
This involves offering a settlement to your creditors, which requires the payment of a lump sum.
Having to pay a lump sum means that a debt settlement isn’t an option that’s available for everyone.
For many, it’s not a possibility because they just don’t have the funds.
However, some people might be able to take this option if they can get their debts reduced.
This debt solution might appeal to you for a few reasons.
If you’re able to do it, it means you can make a one-time payment and then you won’t have to make any more.
Your debts won’t be accumulating interest, and you will pay less due to negotiating them down.
Debt settlement companies offer you this service and might be able to help you achieve the results that you want.
A consumer proposal offers another legal alternative to filing bankruptcy.
Like a bankruptcy, a consumer proposal is arranged by a Licensed Insolvency Trustee.
It allows you to deal with your debts in Ontario without having to surrender any of your assets.
A consumer proposal is suitable for anyone who has debs of up to $250,000, not including the mortgage debt on your primary residence.
Like a bankruptcy, a consumer proposal is a legal process under the Bankruptcy and Insolvency Act.
A Licensed Insolvency Trustee acts as the administrator when you file a consumer proposal and will help you to create a proposal to offer to creditors for paying back a portion of your debts.
It differs from similar debt solutions because it is legally binding.
With a consumer proposal, you will repay your debts over up to five years, but you can do it in a shorter time.
You make payments to the consumer proposal administrator (the trustee), who then distributes those payments to your creditors.
When you file a consumer proposal, your creditors have 45 days to vote on whether to accept or reject it.
They can request a meeting of creditors, which will be held if one or more creditors holding at least 25% of your debt requests it.
It is also possible for the Office of the Superintendent of Bankruptcy to instruct the administrator to call a meeting of creditors.
As with bankruptcy, you will have certain duties and responsibilities if you file a consumer proposal.
You will have to make all of the required payments; if you miss three payments, your consumer proposal will be cancelled, and your creditors will be able to pursue you for your debts.
You will need to submit a list of your assets and liabilities, and you will be required to attend two credit counselling sessions, just as you would be if you filed for bankruptcy.
You will be asked to provide any information that your trustee asks of you.
Why Choose a Consumer Proposal Over Bankruptcy?
There are some excellent benefits to a consumer proposal over bankruptcy if you are comparing the two options.
Both are legally-binding processes, but a consumer proposal could be a better option for you.
A consumer proposal allows you to consolidate your unsecured debt into one easy payment.
It can also mean that you reduce your debt so that you owe less than you did before.
You don’t need to have a good credit score, unlike with a consolidation loan.
Interest charges will be frozen, and you will be able to repay only a portion of your debt.
When you choose to file a consumer proposal, you will be able to protect your assets, unlike when you file bankruptcy.
If you want to avoid losing any of your assets, a consumer proposal is the better choice when compared to bankruptcy.
At the same time, you also get some of the benefits of bankruptcy, including being protected from having your creditors coming after you.
If you want to avoid bankruptcy or it’s not an option for you, a consumer proposal could be the right solution.
Finding the Right Debt Solution For Your Needs
Are you unsure about which debt solution is right for your needs?
Speaking to a Licensed Insolvency Trustee can help you to decide which option is best for your financial situation.
They can help you choose between a consumer proposal or bankruptcy, as well as suggest other solutions that could be right for you.
Find a trustee and book a free consultation to get started with managing your finances and addressing your problems with debt.