There are many options available to help you get out of debt. Bankruptcy is only one choice … and it should be your last choice. Here are your other options:

Proposals to Creditors. Proposals are used by debtors who cannot meet their obligations but wish to make a settlement with their creditors and avoid bankruptcy. First, you work with a federally licensed Trustee to determine how much you owe, how much you can afford to pay towards debt each month, and how long it will take you to pay it off. Then you present a proposal to your creditors.

This agreement may allow you to pay off only a portion of your debts or extend the time you take to pay them off. A. Farber & Partners Inc. can help you draw up and present a formal proposal that is fair and reasonable to your creditors and also affordable to you. If the required majority of your creditors accept the offer, then all your unsecured creditors are obliged by law to also accept the offer.

Here's another benefit: filing a Proposal immediately stops all collection efforts and legal actions by your creditors, including lawsuits, asset seizures, and wage garnishments, without having to file for bankruptcy. This type of debt relief is another alternative to personal bankruptcy filing. Two types of Proposals are outlined below.

Division 1 Proposal. This is used mainly by small to medium-sized enterprises and consumers owing more than $75,000 in debt. Creditors are asked to accept a portion of the full amount owed. Generally, the proposal is directed at ordinary unsecured creditors, while secured creditors are negotiated with individually. In larger, more complex proposals, classes of secured creditors are created to vote on the proposal. If the requisite creditors (50% in number and 66 2/3% in dollar value) agree and the court agrees, the proponent can restructure his or her balance sheet by reducing the debt. If creditors or the court refuse, the company is automatically deemed bankrupt.

Consumer Proposal. This is a simplified form of a proposal available only to individual debtors owing less than $75,000, excluding mortgages on the principal residence. An individual asks their creditors to accept a portion of the full amount owed. If more than 50% of your creditors agree and the court approves, the person can reduce their debt. If creditors refuse, the individual is not automatically deemed bankrupt, but in reality, almost always make an assignment in bankruptcy.

Informal Settlement. This is a proposal made to creditors without the protection of the Bankruptcy and Insolvency Act. It is usually negotiated by insolvency professionals, as they are aware of all other possible options, and add credibility to the negotiations.

Every informal proposal is unique and results from negotiations with creditors, who may or may not accept it. Organizations and individuals in a deep financial crisis and those with numerous creditors may find this solution difficult to implement. For those that succeed in taking this route, an informal proposal enables them to navigate through difficult times without a formal reorganization.

In situations where informal settlement offers are not accepted, it allows creditors to pursue collection actions. The most common cause of failure happens when one creditor obtains a judgment against the debtor that renders the negotiated settlement with other creditors impossible to perform.

Credit Counselling. This is a type of Informal Settlement whereby a third party such as a credit counsellor assists the debtor in negotiations with creditors. This procedure usually requires that the full debt be repaid but stops interest from accumulating.

You should be aware that there are many unlicensed firms and individuals practicing in this field. This poses obvious risks to both creditors and debtors. Unlike a proposal under the Bankruptcy and Insolvency Act (BIA), in Credit Counselling, the creditors are not prohibited from taking collection actions against the debtor!

Debt Negotiation. This process involves contacting some or all of your creditors to explain your financial situation and suggesting an arrangement that is tailored for your circumstances. With assistance from professionals at A. Farber & Partners Inc., debt negotiation could be a viable alternative to bankruptcy, and could preserve your credit rating.

Consolidation Loan. This is a loan acquired to enable the debtor to pay off other debts in full. Usually this will simplify the cash flow (one payment instead of multiple payments) and provide a longer repayment term, thereby reducing the monthly payments. This may be used in conjunction with any other financial reorganization.

Debt Elimination & Consolidation Loan. A. Farber & Partners Inc. can help you secure a single loan to repay all of your other debts by approaching your bank or our network of lenders. While you may still owe the same amount in total, your monthly payment is often lower and you will only have one payment to make every month, which makes debt elimination easier. Debt consolidation is another alternative to filing bankruptcy in Canada.

Personal Bankruptcy. As a last resort, you can address a financial crisis by declaring bankruptcy. Filing bankruptcy in Ontario is a relatively simple legal process that immediately stops all collection efforts and legal actions by your creditors, including lawsuits, asset seizures, and wage garnishments. The personal bankruptcy process includes debt-counselling sessions that can help you create realistic budgets and regain control over your finances. While nobody wants to go bankrupt, this may be the most appropriate solution for bringing closure to a difficult period and rebuilding a sounder future.