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Hayes McNeill & Partners Ltd. is associated with Hayes Stewart Little & Co. Chartered Accountants


Alternatives

►Contact Your Creditors

Contact your creditors to 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 more than 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 a monthly payment to that creditor. Make sure you shop around because interest rates vary. Also, avoid further credit purchases because this could make your debt load too much for you to handle.

►Proposals

Under the Bankruptcy and Insolvency Act, a trustee or administrator files a Proposal, which is an arrangement between you and your creditors to have you 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, your creditors must be better off under a proposal than if you go bankrupt.

There are two types of proposals an individual can file:

  1. Consumer Proposal: A person is eligible if their aggregate debts, excluding debts secured by a principal residence, do not exceed $75,000. The consumer proposals cannot be for more than five years. If the creditors do not accept the proposal, the debtor is not automatically bankrupt. Counselling is required.
  2. Other Proposals: There is no restriction on the amount a person owes. If the creditors do not accept the proposal, the person is bankrupt effective back to the date of the filing of the proposal. Counselling is not required.

Advantages of a Proposal

  • You decide what to offer the creditors based on what you can realistically afford to pay.
  • There is no interest rate charged.
  • Creditors may not take further legal action (e.g. garnishee wages).
  • You retain ownership and control of your assets.

Disadvantages of a Proposal

  • You usually may not obtain further credit while on a proposal.
  • A Creditor who has security (e.g. a lien on your car) may elect to realize on the security (such as repossess the car).
  • If there is a co-signor, the creditor may elect to obtain the payments from the co-signor.
  • The proposal may be refused by all creditors and a refusal cannot be repealed.

Credit Reporting

  • The Credit Bureau will report the proposal for three years after the proposal has been paid.