Many Canadians will face a financial crisis at some time. Many debt problems are easy to solve. Others need professional assistance. Our first advice in regards to dealing with debt and financial problems is admit them and get control before they get out of hand.
This booklet may help you decide whether or not you have a serious debt problem and is it time to start looking for solution to your financial problems. It also gives some suggestions for solving your difficulties and avoiding them in the future. The information in this booklet is meant for individuals only and does not apply to corporations.
Readers are reminded that this booklet is not meant to be used for legal purposes. Its only aim is to give information to individuals who are having financial difficulties.
You have a debt problem, or are going to have one, if:
We recommend you to consider following options when looking for a solution to your financial problems:
When dealing with debt it might help you to explain why you can't make your payments and suggest making lower payments over a longer period of time. You may be surprised but many creditors are willing to accept such arrangements.
A solution to your financial problems could be Credit Counselling. Credit Counselling services are available, but may be different from province to province. Contact a local family or community counseling office or association to find out how to get in touch with such a service. If you have difficulties making a personal budget and sticking to it, counseling may help you.
Debt Consolidation loan is one of the alternatives when dealing with debt: you can ask a bank or financial institution about combining or "consolidating" your debts into one, debt consolidation loan. In such a case, the bank or financial institution will pay off all your debts and, in return, you make monthly payments to that creditor. When dealing with debts in this way, make sure to shop around because interest rates are different. It is important to stop buying on credit. Continuing to use credit could make your debt load too great for you to handle.
If you live in British Columbia, Alberta, Saskatchewan, Nova Scotia or Prince Edward Island, a solution to your financial problems might be applying for a Consolidation Order. A Consolidation Order sets out the amount and the times when payments are due to the court. The court will distribute your payments to your creditors. This part of the Bankruptcy and Insolvency Act (Part X: Orderly Payment of Debts) lets you pay off your debts over three years and frees you from creditor harassment and wage garnishment. Unlike bankruptcy, you do not lose your assets.
Voluntary Deposit scheme (better known as the "Lacombe Law") is similar to a Consolidation Order and is an option for Quebec residents when dealing with debt. Debtor must make a monthly surplus income payment to the court based on income and number of dependents. This service is usually available at the local courthouse.
Under the Bankruptcy and Insolvency Act you may make a proposal to your creditors to reduce the amount of your debts, extend the time you have to pay off the debt, or provide some combination of both.
If none of the above methods solves your debt problem, you may choose to consider personal bankruptcy in Ontario. Filing bankruptcy should be a last alternative if you cannot meet your financial responsibilities through affordable payments over a specific period of time.
If you want more information on filing a consumer proposal to your creditors, contact an administrator of consumer proposals. If you wish more information on filing bankruptcy, you should contact a bankruptcy trustee. The names of trustees and administrators of consumer proposals in your area are usually listed in the telephone book under "Bankruptcy" or "Trustee" or provincial government services. If you cannot secure the services of a trustee, contact the nearest office of the Superintendent of Bankruptcy at Industry Canada (see Appendix II, below).
Before you make a final decision on making a consumer proposal or on declaring bankruptcy, the administrator of consumer proposals or the trustee, as the case may be, will perform an assessment. The purposes of this assessment are to evaluate your financial situation, to provide you with an explanation of the options available to you and to discuss with you the merits and the consequences of your choice.
Should you decide to file a consumer proposal or start a bankruptcy process, the Bankruptcy and Insolvency Act requires that counseling be provided to you. This counseling must be given by a counselor registered with the Office of the Superintendent of Bankruptcy. Counseling consists of two stages. During the first counseling stage, you will be provided with information concerning money management, spending and shopping habits, warning signs of financial difficulties, and obtaining and using credit. In the second stage, the counselor will help you to discover and understand the causes of your insolvency or bankruptcy and will assist you in establishing a rehabilitation plan by helping you to develop recommendations and alternatives for a financial plan of action. You must attend these two stages. Counseling may also be provided to someone who is related to you or has a financial relationship with you. If you feel that you need additional help or assistance, you may ask for a third counseling session.