What are the alternatives to bankruptcy?

When faced with high levels of debt, personal bankruptcy may seem like the only way out. However, there are a number of alternatives to bankruptcy that allow you to reduce your debts, protect your assets and regain financial stability without going down this more serious route.

In Quebec, these solutions include consumer proposals, debt consolidation, voluntary agreements with creditors and budget adjustment support. Each offers different advantages depending on the situation.

The best alternatives to bankruptcy

When you're trying to avoid bankruptcy, there are a number of structured and accessible solutions. These alternatives enable you to reduce your debts, protect your assets and regain financial stability without suffering all the consequences of personal bankruptcy.

1. The consumer proposal

The consumer proposal is a legal solution that allows you to negotiate a repayment agreement with your creditors, supervised by a licensed insolvency trustee. You make reduced monthly payments, without interest, over a set period.

Among the advantages are that you keep your assets (house, car, RRSP), collection calls end immediately and you have a better impact on credit than bankruptcy. It is often preferable when your income allows you to repay some, but not all, of your debts.

2. Debt consolidation

Debt consolidation involves combining all your debts into a single loan to simplify your payments. This allows you to benefit from a lower interest rate and a single monthly payment, making it easier to manage your budget.

However, this option is generally offered by a financial institution and depends heavily on your credit rating. If your credit rating is too poor, it can be difficult to access, which limits its scope.

3. Voluntary agreement with creditors

Another alternative to bankruptcy is to negotiate directly with your creditors. This voluntary agreement may involve a longer repayment schedule or a partial reduction in the balance owed.

The advantage of this solution is its flexibility: it can be adapted to your income and constraints. However, unlike a consumer proposal, there is no legal framework that obliges all creditors to respect the agreement, which entails risks.

4. Budget advice and financial recovery

In some cases, debt can be corrected by better financial management. Budget coaching and financial recovery enable you to review your spending habits, plan your payments and gradually get back into balance.

These solutions are ideal for prevention, before debts get out of hand. With the support of a Licensed Insolvency Trustee, you can avoid having to resort to legal procedures such as bankruptcy or a consumer proposal.