There are five alternatives to bankruptcy in Canada. It’s important to understand all alternatives to bankruptcy in Canada before you make a decision on how to deal with your debts. Your options to avoid bankruptcy in Canada are:
Do nothing. If you are not working, and if you have no assets, even if you don’t pay your debts your creditors cannot garnishee wages you don’t have, or take assets you don’t own. This option doesn’t solve your debt problems, but it also costs you nothing.
Get a debt consolidation loan and use the money to repay your debts. Obviously this does not lower your debts, as you are only trading one debt for another, but if you can borrow at a low interest rate (perhaps with a second mortgage) and use the money to pay off high interest rate debt (like credit cards) a debt consolidation loan may be a worthwhile option.
Do a debt settlement. If your debts are old, your creditors may accept a lump sum payment for 50%, or even 20% of the amount owed. Your credit is still damaged, and this option works best if you have a lump sum of money.
Go to credit counselling, also known as a debt management plan. A not for profit credit counsellor can work out a debt management plan where you repay your debts in full, but at zero or low interest. This option works well if you have a manageable level of debt, and just need a break on the interest. This option works best with bank loans and credit cards, but is less effective with income tax debts and other government debts.
File a consumer proposal. If you have more debt than you can reasonably repay, including bank loans, credit cards, tax debt, and payday loans, a consumer proposal may be one of the best alternatives to bankruptcy in Canada. You get one reasonable monthly payment, and all of your debts are dealt with.
Everyone’s situation is different, and no one option is right for everyone, so contact a licensed consumer proposal administrator and bankruptcy trustee to explore your options, and then make a decision.