Exploring Options Beyond Bankruptcy

Understanding the Debt Relief Alternatives to Declaring Personal Bankruptcy

Declaring bankruptcy is a potential solution to your debt woes, but it does carry its own responsibilities and downsides. Many people prefer to explore alternatives first, looking to avoid bankruptcy, either due to the stigma around the process, or because they want to find another option.

If you’re determined to avoid bankruptcy, there are several steps you can take to address your debt challenges to get your finances back on track.

H3: What are Signs of Too Much Debt?

Many people fall into debt without even realizing how deep into the red they’ve gone. If you learn to spot the warning signs, you can avoid a potential bankruptcy.

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  • All your money goes towards paying debt
  • You’re unable to save
  • You can only afford to make the minimum payment on credit obligations
  • You apply for credit and consistently get denied
  • You’ve withdrawn all your savings to make ends meet
  • You routinely pay your bills late
  • Collection agencies and/or CRA have commenced collection actions


These signs not only impact your financial health, but they can also be emotionally (and even physically) draining. If you are worried about too much debt, you’re not alone. According to the Financial Planning Standards Council, 42 percent of Canadians surveyed said money was their biggest stressor, with 83 percent of participants saying they’d wished they’d made better financial decisions.

Simply put, you’re not alone in your worries. If you’ve noticed some of the above signs in your own financial situation, it’s important to get help sooner than later.

How Does Filing for Bankruptcy Affect You?

Getting to the point where you’re considering bankruptcy means changes must be made that could impact both your short and long-term lifestyle. To get on the right path, it’s important to recognize that your debts are overwhelming you and that you can’t continue without looking at your options.

The next step is looking to see if any lifestyle or spending priority changes can be made. Once you have a better financial snapshot of where things stand, you can decide if bankruptcy is the right decision for you.

What are the Pros of Filing for Bankruptcy?

While bankruptcy often comes with a negative connotation, as you weigh your options you should understand there are a number of benefits by taking this course of action.

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  • Creditors’ claims are legally frozen so that no additional interest accrues
  • Creditors will stop coming after you, calling and suing you
  • With a few exceptions, debts will be discharged and eliminated
  • Credit rating is stabilized
  • You will gain an understanding of your assets, debts and budget


Once you file for bankruptcy, you’ll eliminate having multiple monthly payments. You will make one consolidated and affordable payment to the Trustee of the bankruptcy. Along with financial and money management coaching provided by the Trustee and its counselling staff, you will learn how to budget and save.

What are the Cons of Filing for Bankruptcy?

While bankruptcy can help you get back on track financially, there are some drawbacks you should understand as you weigh this option:

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  • Loss of all credit cards, along with any unsecured credit lines
  • Possible loss of assets that are not legally exempt from the process
  • A first-time bankruptcy remains on credit reports for six years after a discharge; more than one bankruptcy is noted on credit reports for 14 years post discharge
  • For a few years, it can be hard to get credit with a bankruptcy notation on a credit report


Before filing for bankruptcy, it’s a good idea to weigh the pros and cons and to speak with a Licensed Insolvency Trustee who will professionally guide you to a healthier and happier financial future.

Alternatives to Filing for Bankruptcy

Many people see bankruptcy as a last resort. If you want to avoid bankruptcy, you can explore some of the alternatives.

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  • File a consumer proposal. You might have heard of this option, but may be wondering just what a consumer proposal is. It’s a federal government program that will allow you to consolidate and dramatically reduce your debt. A successful consumer proposal, administered by a Licensed Insolvency Trustee, will permit you to pay your creditors a percentage of what you owe them over an extended period of time of up to 5 years. All payments are consolidated into a single affordable monthly payment, which the LIT then distributes to your creditors. This option will give you a better credit rating than bankruptcy.
  • File a debt management plan. A debt management plan is when an agency, other than a Licensed Insolvency Trustee, pools your debts together and negotiates a settlement with your creditors. You will have one monthly payment to the agency who will pay the creditors. Interest is usually waived, but the full amount of debt principal will still be payable. This option will affect your credit rating in the same way a consumer proposal does. You will pay much more to your creditors than under a consumer proposal which reduces principal and interest. The agencies that do this work are not regulated, nor are they subject to rigorous training or professional ethics.
  • Debt consolidation loan: This is a loan that does as it implies, taking your outstanding debt and simplifying it into one monthly payment, possibly with a lower interest rate. All your creditors are paid at once. You will no longer feel overwhelmed by multiple payments per month. You then repay the loan to the lender, as you would any other debt. This option is usually much more expensive than a consumer proposal as the principal and interest payments substantially exceed what would be paid in a consumer proposal.


Every person’s financial situation is different, and a licensed professional can help you determine the solution that is best for you. Baker Tilly Ottawa Ltd. is a Licensed Insolvency Trustee. It offers debt management advice and will help you understand the bankruptcy and consumer proposal options. It can also administer your bankruptcy or consumer proposal, should you decide to make a formal filing. Its Passion, its Mission, is your health and well-being!