Before deciding that bankruptcy is the only solution to getting out of debt, it’s a good idea to find out about other solutions. Consolidating your debts is one of them.
Consolidating your debts means borrowing a single amount of money from a financial institution to pay all your other debts.
This way, in the future, you will only have one creditor to pay, which make it much easier to manage your finances. (A creditor is a person or business that is owed money.)
There are no specific rules for this solution in the law. It is more a question of common practice at financial institutions.
If the Financial Institution Refuses
The financial institution you ask to consolidate your debts is free to agree or refuse to lend you money. It can evaluate your application using its own criteria and could take into account, for example, these factors:
- your income (how much money you make from a job, running a business or other source)
- the amount you want to borrow
- your credit history (record of repaying money you owe)
- the value of what you own (your “assets”)
It is therefore important to consider consolidating your debts before your credit record shows too many bad debts (debts that haven’t been paid or are paid late).
The financial institution might also require security. Since it is taking a risk by lending money to someone who has financial problems, it might want to protect itself by requiring, for example, that a relative agree to repay the loan if you cannot.
This article explains in a general way the law that applies in Quebec. This article is not a legal opinion or legal advice. To find out the specific rules for your situation, consult a lawyer or notary.