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.
