One method of preventing bankruptcy in Canada is to file what is popularly known as a Consumer Proposal. A Consumer Proposal is a deal reached between the debtor and the creditors. A standard proposal has a debtor making monthly payments for at most 5 years. Chapter 13 in America has a reorganization plan that also permits a repayment of 5 years but the difference is that in the United States you must file bankruptcy to avail of it. But this is not necessary in Canada, so your credit report remains free from the blot of bankruptcy.
In many proposals the payments are slightly lower than the actual debt. Creditors usually accept the deals because they are getting something in payment instead of nothing. It makes sense as the debtor still has to pay their debt and the creditor gets some part of the payment.
Once a debtor makes this proposal the creditors get 45 days to take decision. If they accept the proposal, the debtor starts making monthly payments to the Proposal Administrator. In turn, the creditors are prohibited from calling, writing or troubling the debtor in any way. Only in extreme cases of rejection, the debtor may have no other option other than to declare bankruptcy. A Consumer Proposal can only be made by a debtor whose debt lies between $5000-$75,000. For debt exceeding $ 75,000 the proposal must be filed under the Division I of Part III of the Bankruptcy and Insolvency Act.
You will have to seek help from a Proposal Administrator. A Proposal Administrator is an authorized trustee in bankruptcy but other people can be appointed to act as administrators. The important reason for filing a Consumer Proposal is that it prevents a stain of bankruptcy on your credit report. You actually want to prevent bankruptcy to save your credit if nothing else. Laws in various countries have changed, making it difficult for borrowers not to take responsibility.
Filing a Consumer Proposal allows both sides to take advantage of a repayment plan. The creditor may not get the full debt but it is better than not getting anything or taking risks in bankruptcy, which can lead to getting less money than what they would in a Consumer Proposal. The debtor does not escape from their debt either. So a Consumer Proposal will serve a dual purpose by taking care of the interest of both parties.
Or course, a debtor does benefit more since their debt decreases, they can pay it off in 5 years and will not be troubled by collection agencies in future. If you have multiple creditors, you can reach an agreement with each.