• Home
• About Us
• FAQ
• Options
• Help Info
• Forms
• Contact Us

When you have debt problems there are a number of options available, bankruptcy is only one of them.

The option you choose is up to you, but the ultimate decision should be based on professional advice from a Licensed Trustee who is qualified, knowledgeable and can explain the consequences of each.

The following describes the typical options available, to find which one is best suited to you, please feel free to call us at any time.

1.) DO NOTHING:

This is the easiest thing to do, however, it will not resolve the issue. Some people hope that by
ignoring the problem, it will go away.

Unfortunately, this is not true and the result will likely be a garnishment, suspension of credit
privileges, eviction for non-payment of rent, or some other similar event. Rather than maintain
the status quo, there is a need to be proactive and deal with the problem now.

2.) INCREASE YOUR INCOME AND REDUCE YOUR EXPENSES:

This may sound simple; get a second job, take in a boarder, or sell some assets but it is usually not
that easy. From our experience, we have found that most people are stretched as thin as possible
already. Between commitments at work, home and raising a family, there is precious little time for
another job and not everyone has a spare room to rent or has non-essential assets to sell that will
raise significant cash to eliminate debt.

You have probably made changes to your household budget and already trimmed all the extras you can.

3.) CONSOLIDATION LOAN:

If your credit rating is still okay, and that is a big “IF”, this may be an option. You can ask
your bank or financial institution for a consolidation loan to combine all of your debts into one loan.

Advantages:

• ➢ Avoids Bankruptcy.


• ➢ May reflect more positively on your credit rating.


• ➢ More manageable repayment terms.


• ➢ Should result in a lower interest rate as compared to the existing credit cards.


• ➢ Can still file for bankruptcy or do a Proposal at a later date.

Disadvantages:

• ➢ No potential to re-negotiate the terms if you are unable to manage the payments.


• ➢ You have no protection from creditors who are not paid out as part of the loan.


• ➢ You may have to pledge your assets or have a co-signer, which puts your assets or co-signer       at risk should you default.

4.) ORDERLY PAYMENT OF DEBTS (O.P.D.):

This is a government sponsored program offered in 4 provinces, including Alberta. The basic criteria is that you are required to repay 100% of your unsecured debts plus pay 5% interest per year.

The program expects that you will be able to repay your debt within a 3 to 4 year period and is subject to creditor approval. If the creditors accept the plan of arrangement, the Court issues a Consolidation Order and you are protected.

The more debt you have the larger the monthly payments are. If your debts are substantial, this may not be an option for you unless you can afford a large payment every month. If you default on the program, the creditors can garnishee you immediately as it is considered to be a default judgment.

The benefit of the program is that you make one monthly payment to a third party who pays your
creditors in an orderly fashion.

The drawback is that the credit bureaus rate your credit as R-9 during the repayment period and upon successful completion, your rating improves to R-7. Lenders and credit granters consider this to be similar to a Bankruptcy and you may find it difficult to obtain credit during and after the completion of the program.

5.) PROPOSAL:

A Proposal is similar to a Consolidation Loan or Orderly Payment of Debt in that you are making a
monthly payment to one organization to repay your debts. The biggest difference is that there is
NO interest applied to the debt AND you are able to settle your debts for less than the full
amount owed.

Proposals are administered by a Trustee in Bankruptcy pursuant to the Bankruptcy and Insolvency Act.
A Bankruptcy Trustee can formulate a Proposal that provides you with protection from creditors,
enables you to support your family while reorganizing your budget to accomodate a monthly payment that is affordable and is based on your true ability to pay. If there is little or no money to dedicate to paying debt, then this may not be a good option for you. If you do have an ability to pay and feel an obligation to do so, this may the right option for you.

A Proposal must provide the creditors with a greater recovery as compared to a Bankruptcy. In other words, there must be some financial incentive for them to accept the terms of the Proposal, otherwise, creditors will refuse to accept it.

There are two different types of Proposal and the type of Proposal you can apply for is usually determined by the amount you owe. Once again, the Trustee will advise you on this. You must include all unsecured debts. You can not pick and choose.

Advantages:

• ➢ Protects you from the actions of your unsecured creditors.


• ➢ Can stop most garnishees.


• ➢ Creditors can not seize assets, unless they are “secured” and you have defaulted on payments.


• ➢ Stops harassment from creditors.


• ➢ Once accepted by the majority of creditors, it is binding on all creditors, including the ones who may have voted against it.


• ➢ Gives you up to 5 years to pay with no interest, and in some cases allow for a longer repayment time.


• ➢ Can reduce the total amount of your debt.


• ➢ No further interest accrues or is added to the debt.


• ➢ Does not affect your assets unless you offer them to the creditors.


• ➢ Can include income tax debt to Canada Revenue Agency.


• ➢ Can be amended if your personal situation changes.


• ➢ You will receive financial counseling during the process in order to learn from the experience.


• ➢ The Trustee is paid from the Proposal and does not charge an additional fee to administer the Proposal so there are NO additional costs to you.


• ➢ Once completed you are considered to be “relieved” of your debts and no creditor can pursue you for a debt that was included. Some exceptions do apply.


• ➢ The legislation protects you from job loss, eviction and utility disconnections. This means that you can not be fired or evicted just because you filed a Proposal.


• ➢ If you want to surrender a leased or purchased vehicle without having to pay for the shortfall or deficiency, you may accomplish this by filing a Proposal. The only other method is by filing for
  Bankruptcy.


• ➢ In the long term, it has a slightly better effect on your credit rating than Bankruptcy.

Disadvantages:

• ➢ Student Loans are an exception to the rule. If you have not been out of school for more than 7 years, a Student Finance debt still has to be repaid in full, unless they consent to the settlement. They can be included in the Proposal and you can be relieved of their payments during the Proposal, however, you are liable to pay the accruing interest and any residual debt, after the Proposal.


• ➢ Some debts that can not be included in a Proposal are, Alimony and Maintenance, Court Fines, debts involving fraud or misrepresentation, civil judgments arising from bodily harm intentionally inflicted, or sexual assault or wrongful death, etc.


• ➢ It usually takes longer to complete a Proposal than a Bankruptcy, so it takes longer for a “fresh or new start”.


• ➢ Must be accepted by the majority of your creditors and approved by the Court. If it is rejected by your creditors you can not file another Proposal without a Court Order or you may end up in Bankruptcy. As there are exceptions to this rule, it is recommended that you speak with a Trustee for information.
• 
  ➢ Proposal's are a more expensive process than a Bankruptcy.

SEE THE FREQUENTLY ASKED QUESTIONS FOR MORE INFORMATION ON PROPOSALS

Back To top

6.) Personal Bankruptcy:

This is a legal process that relieves you of most of your debts. It allows an honest person who has fallen on hard times, the ability to get a fresh start. The biggest misconception about Bankruptcy is
that you lose everything. THIS IS NOT TRUE!

The second misconception of Bankruptcy is that someone else is paying off your debts. THIS IS ALSO NOT TRUE!
The creditors are writing off your debt. Creditors charge high interest rates for credit cards and unsecured lines of credit to help them absorb this and other types of losses.

Bankruptcy is administered by a Trustee in Bankruptcy, who is licensed by the Office of the Superintendent of Bankruptcy, an agency of Industry Canada, a department of the Federal Government. The Superintendent monitors the actions of the Trustee to ensure the process is being administered properly.

Bankruptcy is usually the last resort and for some it is the only choice left. It is a voluntary process 99% of the time. Once you realize that you are insolvent (you have more debt as compared to the value of your assets or you can not pay your obligations as they become due) this may be your only option.

If you are concerned about your debt situation, a free confidential consultation with a us will outline the available options. Although you may be under a lot of pressure from creditors, the Trustee's primary focus is to educate and inform you of the different processes. Once you have learned about the options, you will decide which one is best for you and your family. A Trustee should not pressure you into making a decision on the spot as careful thought and consideration is required. If you are feeling pressured by a Trustee, perhaps you need to meet with another Trustee for a second opinion or a different approach.

Once the decision is made to go Bankrupt, there is a tremendous sense of relief as you can move
forward and start rebuilding your finances.

The process is a minimum of nine months if this is the first time you have filed for Bankruptcy but may be 21 months if you have surplus income. There are exceptions to this rule, but normally if you do everything that is asked of you by the Trustee during the period, your debts are written off and you can start to rebuild your credit.

If this is your second bankruptcy, the length of the bankruptcy is 24 months minimum and may be 36 months if you have surplus income. If this is a third or fourth bankruptcy, you will be required to attend court for a discharge hearing.

Bankruptcy is not a selective process, therefore, you must include all debts. You can not pick and choose.

Advantages:

• ➢ Protects you from your unsecured creditors.


• ➢ Relieves stress and anxiety.


• ➢ Is the least expensive option.


• ➢ You will receive credit counseling in order to learn from the experience.


• ➢ Stops most garnishees and collection proceedings including Canada Revenue Agency (The exception once again is secured creditors; if you failed to make those payments they can still repossess the collateral pledged ie: your vehicle.)


• ➢ Gives you immediate relief from collectors.


• ➢ If your utilities are close to being disconnected, they can be restored once you have filed for bankruptcy.


• ➢ Several assets are protected from seizure. Please refer to the Asset Exemption section in our Frequently Asked Questions page.


• ➢ You are required to record your income and expenses during the period as part of the learning and budgeting process.


• ➢ If your situation improves, the Bankruptcy can be converted to a Proposal during the process.


• ➢ Allows you to surrender a leased or purchased vehicle without paying for the remainder of the contract (the shortfall).


• ➢ You will stop paying all of the unsecured creditors so that you feel immediate financial relief.


• ➢ Gives you a fresh start.

Disadvantages:

• ➢ It will hurt your credit rating but in most cases the damage is already done.


• ➢ All credit cards must be surrendered.


• ➢ You may be required to obtain a new bank account.


• ➢ You cannot be the director of a corporation.


• ➢ There are some restrictions on self employed people.


• ➢ You may lose some assets not protected by the Act.


• ➢ It will remain on your credit report for 6 years after your discharge in a first time bankruptcy and 14 years after discharge for second and subsequent filings.


• ➢ You can not change your mind. Once you sign the papers and they are submitted to the government you are "Assigned in Bankruptcy" and you must follow through with your duties.
  

SEE THE FREQUENTLY ASKED QUESTIONS FOR MORE INFORMATION ON BANKRUPTCY