Faced with a possible situation of insolvency or financial instability, can a voluntary deposit with a bankruptcy trustee be a good way to avoid bankruptcy? In this article, we explain what voluntary deposits are and how they can help you pay off debts and avoid further financial complications.
The short answer is: yes, starting a voluntary escrow through a trustee can be a useful way to reduce debts, ensure peace of mind for creditors and avoid the need to file for personal bankruptcy.
If you are considering taking this alternative to protect your finances, it is important that you understand how it works, as well as its benefits.
What is a voluntary deposit?
The definition of voluntary deposit refers to a fixed amount of money, usually a pre-established amount, that is set aside from the rest of a person’s salary or independent income for a specific purpose. This can be saving or paying debts, for example.
Now, in the context of an insolvency trustee, the voluntary deposit implies that the person delivers that part of the money to the Court on a monthly basis to be distributed to the entities where he/she has debts and to settle proportionally the interest and capital values.
The trustees, authorized persons with expertise in financial administration and bankruptcy law, are in charge of guiding the management of the voluntary deposit money.
That is, they can provide you with advice to make calculations and take into account every detail regarding your salary and your responsibilities and basic needs. Of course, they will also take into account the number of dependents you have to ensure that you will be able to cover their needs as well.
Benefits of voluntary deposit
The benefits and facilities of the trustees with respect to this type of program depend on the region in which you are located. This is because these are processes that are also administered by the local courts. So, you should inform yourself about the criteria that govern the voluntary deposit in your city.
In Quebec and in the voluntary deposit program offered by Poupartsyndic.ca, you receive the following:
- The legal interest rate in Quebec is 5%. In other words, you will only pay this interest on your debts.
- Protection against seizure of your furniture (including appliances and everyday objects).
Please note that the protection does not prevent the seizure of your car, if you have one.
Another advantage of this type of process is that you will only have to make a single payment and this will be destined to settle accounts with all creditors. In other words, you will avoid the hassle of making separate accounts and making independent deposits.
How to start a voluntary deposit?
Of course, the first requirement that must be met to take advantage of the benefits of a voluntary deposit is that you are disciplined and willing to set aside a specific amount of your income each month.
This must be done without fail to avoid any inconvenience with the law and, above all, so that you yourself have the peace of mind that your dues are being paid to creditors and you will avoid the risks of personal bankruptcy.
You will also avoid continuing to build a bad credit history that could linger for the long term and cause you inconvenience with loans.
If you have already made your decision, all you will have to do is go to the Civil Court of your city (in this case Quebec) and make a declaration that you will begin the voluntary deposit.
Thereafter, you will make monthly payments to the Tribunal until you have paid 100% of your debts.
Although all these details can be complicated to understand and to carry out properly and without confusion, we are here to guide you and help you get out of debt.
So don’t hesitate to address any concerns if you are interested in straightening out your finances, avoiding lawsuits and getting rid of creditor calls.