How debt relief works: A business owner case study

How debt relief works: A business owner case study

A lot of people have the misconception that individuals who make an insolvency filing lack a moral desire to pay their debts and happily use an insolvency filing to “game the system” and leave their creditors in the lurch. In most cases, nothing could be farther from the truth. In fact, if there’s one thing that most of the individuals we help have in common it's that they never thought an insolvency filing would be something they’d ever need or consider. They typically knew nothing about debt relief, so they struggled with their debt for years before coming to see us.

One of the hardest things about being a Licensed Insolvency Trustee is hearing such stories and knowing that people could have gotten help earlier. So in this series of blog posts we're highlighting some of the people we’ve helped and their situations*. It’s possible you’ll see yourself, a client, or someone you care about in their stories. If not, perhaps you’ll at least have a better understanding of the reasons that people decide to make an insolvency filing. 

*Names and other details have been changed to protect the confidentiality of the individuals whose stories we tell


Richard reached out to us after a creditor who was trying to collect from him recommended he talk to a Licensed Insolvency Trustee, it being clear he did not have the means to re-pay them. Richard was stunned. He never thought he would find himself in this situation, having been a successful business owner and financially stable for all of his 75 years… until recently.

Things had taken a turn after Richard’s wife passed away several years prior. Before her death they were retired, the house was paid off, and they had a good retirement fund. But after his wife was gone Richard grew restless, so he decided to start a new business. He didn’t consider it a big risk to take on debt to build the business – he had done the same very successfully before. However, things had changed since he had last run a business. The economy was now more unstable, and some competitors in his industry were using new technology and business practices which allowed them to slash their prices.

As revenue lagged, Richard tried everything to save the business and keep his employees working, including using all of his retirement savings and taking on personal debt (including a mortgage on his house) to cover losses while he tried to generate more sales, which always seemed to be just beyond reach. Eventually, when Richard ran out of funds to support the business, creditors started taking action to collect, including seizing the business’s assets. Richard was forced to close the business, but there weren’t enough assets to go around and Richard and the business were left with hundreds of thousands of dollars in debt which neither could pay.

Richard initially approached us to discuss putting his business in bankruptcy. However, we determined that there would be nothing of value to liquidate in a bankruptcy, as the business’s major creditors had already seized everything of value. Neither the business or the creditors would gain anything from the bankruptcy other than tidying the situation up, the cost of which no one was willing or able to fund. The more critical issue was that Richard was “left holding the bag”, as he had guaranteed many of the business’s debts and accumulated several of his own debts by using personal credit cards to cover business expenses.

We conducted a careful review of Richard’s situation to clarify what assets he might be able to liquidate to pay the debt, and to confirm exactly how much debt he was personally responsible for, as Richard had begun to lose track of what he had signed during the past few desperate years. We talked to Richard about all of his options for dealing with the debt, including negotiating with the largest business creditor to settle the debt. However, he had no means to support a reasonable settlement. There was some equity remaining in Richard’s house, but otherwise he had nothing left to pay his debts – no income, and no prospects of employment due to his age and health problems that had begun to crop up during the past few years. Even selling the house wouldn’t solve the problem, as the remaining equity was nowhere near enough to pay the debt.

After several meetings, it was determined that the best (and only realistic) option for Richard was to make a voluntary assignment into bankruptcy. Often, in bankruptcy an individual does not actually lose any assets for several reasons which we’ve outlined in a previous blog post. However, in Richard’s case, he had absolutely no income so he couldn’t afford to service the mortgage on his house, make car payments, or even pay utilities. Even if he could have maintained the payments, he would have had no means to re-purchase the equity in his house that was legally available to his creditors. So we worked with him on arrangements to sell his house and vehicle. In the meantime, we got in touch immediately with an agency that assists seniors with access to government and community benefits so that they could help Richard apply for a government pension and find subsidized housing. And we negotiated an extended closing date with the purchaser of his home to give him time to find a place to rent.

When Richard first reached out to us, he was under extreme stress and suffering physical effects. He had also been isolated for some time from friends and family due largely to his stress and embarrassment over his financial situation. After bankruptcy, his life was significantly altered. His standard of living was not what he had become accustomed to and it was clear that he would be living on small means going forward. He was not unaffected by the failure of his business and his insolvency filing by any means. But his stress level was reduced and he re-connected with family. He was no longer dealing with calls from creditors and the bad news that had come in waves while he was trying to save the business had stopped. He was now able to start building a plan for his future.

Don't delay getting help

Too many people delay coming to see a Licensed Insolvency Trustee, spending months, years or even decades struggling with their debt, because they don’t think people like them make an insolvency filing. The truth is, most people who take this step are regular people who’ve gone through a difficult time and, as much as they want to pay their debt, they need a re-set.

If you are struggling with debt and want to explore your options, we can help. Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the southern Alberta region. We regularly help individuals navigate their options for dealing with overwhelming debt. If you would like a free, confidential consultation to review your options, contact us.

Disclaimer: This publication provides general information and should be seen as broad guidance only. The information contained herein cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon this information without obtaining specific professional advice relating to your particular circumstances. Charla Smith & Company Ltd. does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

Frequently Asked Questions

Licensed Insolvency Trustees (or LITs) are the only people who can provide bankruptcy or Consumer Proposals as an option for dealing with your debt. They are uniquely qualified to provide these services and give you advice about your debt. For more information, see our blog post: What is a Licensed Insolvency Trustee?

Not at all. Bankruptcy is one of the services we provide but it is not the best solution for everybody. In fact, more often than not we recommend a solution other than bankruptcy. A Licensed Insolvency Trustee is simply the best resource for reviewing your options, as we are highly trained, regulated by the government and our professional association, and well-versed in a variety of options. Contact us if you'd like to start a conversation about your options.

Not likely. Here in Alberta, there are laws that exempt certain assets from seizure by your creditors, and that includes bankruptcy. Depending on your situation, you may not lose any assets at all - many don't. For more information, check out our blog post entitled: What I Wish People Understood About Bankruptcy | Do you lose all of your assets in bankruptcy?

We would be happy to set up a meeting to discuss the extent to which your assets may or may not be exempt in bankruptcy.

Check out our Consumer Proposal and Bankruptcy pages for information about these options and their pros and cons. For information about other options, check out our financial advice and information about community supports on our blog posts. 

For more information or an opinion on which option is best for your specific circumstances, contact a Licensed Insolvency Trustee for a free no-committment assessment.


With our experience and our caring approach, we will help you find the best option for debt relief based on your unique situation - from advice on talking to your creditors to a consumer proposal or bankruptcy, and everything in between. We are here to lift the burden caused by overwhelming debt. 

Contact us today at 1-403-899-3890‌ for a FREE, confidential, no-commitment meeting, and let us guide you to regaining your financial footing.

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