What is a Voluntary Deposit?

A voluntary deposit is a way to repay your debts through the Court. But what exactly is it? What are the advantages and disadvantages? Is it a good alternative to bankruptcy? Here’s what you should know.

In short

A voluntary deposit consists of regularly depositing a portion of your income with the Court of Quebec so that this money can be distributed to your creditors to pay off your debts. It has many advantages, but also some drawbacks.

Advantages :

You benefit from a fixed 5% annual interest rate ;
Your salary and real property are protected from seizure ;
Your creditors can no longer harass you ;
You avoid bankruptcy.

Disadvantages :

You have to pay 30% of your pre-tax income, which is considerable ;
Your credit rating is affected ;
You are not protected from having your home, car, bank accounts or unpaid furniture seized.

A voluntary deposit is a solution to indebtedness that is specific to Quebec and allows to resolve your debt problems by paying a percentage of your salary to the Court which will then repay your creditors.

At regular intervals (e.g., every month or every two weeks), you have to pay a portion of :

Your salary ;
Your income (if you are self-employed) ;
Your unemployment benefits.

The amounts paid to the Court is distributed to your creditors until your debts are fully paid.

How is the payment amount calculated?

The Court uses a number of criteria to determine the amount and applies a 5% interest rate.

Here’s how it works :

The Court uses your gross pre-tax income ;
As applicable, it deducts the funds you need to take care of your dependents (for example, money to look after your children) ;
You then have to pay 30% of the remaining gross income. Remember, this is pre-tax income, so it amounts to more than 30% of your net income.

Annual interest of 5% is added to the amount which is then paid on a regular basis to your creditors until your debts are fully paid.

If you do not have dependants but pay alimony to a former spouse, the percentage could increase to 50%.

What are the advantages of a voluntary deposit?

A voluntary deposit may seem interesting because of its many advantages :

It has a fixed annual interest rate of 5%, which is lower than that on most loans, particularly credit cards ;
It protects you from having your salary or property seized ;
Like other financial recovery solutions, whether bankruptcy or a consumer proposal, a voluntary deposit stops creditor harassment ;
Lastly, it avoids bankruptcy.

What are the disadvantages?

The payment amount may not be appropriate for your budget, 30% of pre-tax income is a significant portion ;
Your credit rating is affected, as it is with a personal bankruptcy ;
This solution does not protect you from having your home, car, bank accounts or unpaid furniture seized.

Furthermore, since a voluntary deposit is an option that is only valid in Quebec, if you move to another province, you can no longer use it.

In any event, if you want to put an end to your debts and financial worries, contact a licensed insolvency trustee like the ones at Raymond Chabot. This expert will take stock of your financial health and help you consider whether a voluntary deposit is truly a good option for you or whether another alternative might suit you better.

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Some alternatives to bankruptcy, such as a proposal or debt consolidation or even a review of your personal or family budget, could be considered, depending on your situation.

What is the process for a voluntary deposit?

Register with the office of the Court of Quebec ;
You can find the closest office by going to the Justice Québec site ;
There are two forms on this site to be filled in, the “Declaration by Voluntary Deposit Debtor” and the “List of Creditors” ;
You will need to have your income amount and the amounts due to your creditors on hand.

Have your debts piled up? Contact one of our licensed insolvency trustees, it’s free and confidential.