Signs You May Need To Consider Bankruptcy

Signs You May Need To Consider Bankruptcy

The first word that comes to mind for most people when they realize they can’t pay back their debt is “bankruptcy”. But how do you know when bankruptcy is the right option for you?

As a Licensed Insolvency Trustee, one of the most common things we hear from people who call us is that they know very little about their options for dealing with their overwhelming debt. Insolvency is (understandably) one of those things people don’t generally bother to learn about unless they are dealing with it, and most people never imagined they would end up in this position.


Licensed Insolvency Trustees (formerly known as Trustees in Bankruptcy, or colloquially referred to as a Bankruptcy Trustee), are the professionals to talk to if you think you might need to consider bankruptcy. However, most people want to do a bit of research first; therefore, we’ve created this blog post to provide you with some signs that you might need to consider bankruptcy. However, keep in mind that bankruptcy is not the only option a Licensed Insolvency Trustee can provide, and you may find that other options are better for your situation.

Here are some situations where you may need to consider filing for bankruptcy:

  • You’re struggling to keep up with your monthly debt payments on credit cards, loans, or other debts.

Perhaps interest rates have increased your required monthly payments beyond what your budget can handle. Or maybe your other bills have risen due to inflation, so that you no longer have enough left in your budget to pay your debt payments.

  • You have a large amount of unsecured debt.

Unsecured debt includes credit card debts, personal loans, most income taxes, and personal guarantees of corporate debts. If the total amount of your debt is clearly more than you can pay within any foreseeable period of time, you may need to consider bankruptcy.

  • Your income has decreased significantly.

If you’ve experienced a significant decrease in income due to a job loss, health problems, etc., a debt level that previously felt manageable may no longer be feasible to pay off. 

  • You’re facing legal action from creditors.

If creditors are threatening to sue you or they have already obtained a court judgment against you, the next step could be wage garnishments or asset seizure, if those aren't already happening. If you owe taxes, actions taken by Canada Revenue Agency can be particularly fast and severe. Once these actions commence, you may need the automatic stay of proceedings provided by a bankruptcy to get relief.

Bankruptcy has serious consequences, including the impact on your credit score and potential loss of assets. It is not a step that should be taken lightly. However, it can be a lifeline in the right situations. And it may not be your only option. Before getting too concerned about bankruptcy, it’s best to speak with a licensed insolvency trustee who can assess your situation and help you get an understanding of all of your options for managing your debt.

Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the southern Alberta region. We regularly help individuals navigate their options to determine if bankruptcy is right for their situation. If you would like a free, no-commitment 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.

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Frequently Asked Questions

There are several factors which must be considered to determine which options are feasible for you and to select the best one, including:

  • What assets do you own?
  • Who do you owe money to and how much?
  • What sort of income are you bringing in and how predictable is it?
  • What is your family situation?
  • Your personal goals and priorities

Check out our Consumer Proposal and Bankruptcy pages for information about each of these options and their pros and cons. For more indepth information about these and other options, we've provided a plethora of information on our blog

For a fulsome review of your situation and advice about which option is best for your specific circumstances, contact a Licensed Insolvency Trustee for a free no-committment assessment.

There's a common misconception that if someone becomes bankrupt, everything they have gets sold to pay creditors and they're left with nothing. 

The truth is, people often don't lose their assets in bankruptcy for one or more of the reasons we've discussed in What I Wish People Understood About Bankruptcy: Will I Lose All Of My Assets? :

There are many factors unique to your situation which must be considered to determine what you could keep in a bankruptcy. To be sure, the best way to find out is to contact a Licensed Insolvency Trustee for a free no-committment assessment.

Sometimes it helps to know how much your creditors would get in a bankruptcy, as this can help you figure out what a fair settlement with your creditors looks like. The amount your creditors could expect to receive if you made a bankruptcy filing is very much dependent on your situation.

A Licensed Insolvency Trustee will review your assets, debts, income, and family situation, while considering the applicable provincial laws about exempt assets, in order to determine what impact bankruptcy would have on your creditors. Be careful taking advice from anyone else about bankruptcy – only a Licensed Insolvency Trustee can provide bankruptcy filing services, so they have the training and experience to provide information you can rely on. 

For more details on the features and benefits of Bankruptcy, visit this page or contact us.

Typically the only impact on your spouse occurs if they have co-signed any of your debt. In that case, if you are not able to pay the debt your spouse may become fully responsible for it. Often, people bring their spouse along to our consultation meetings, in which case we are able to discuss their situation as well, and the impact your options might have on them. Contact us to set up a meeting.

Often no one finds out unless you tell them. Most bankruptcies do not have to be advertised in the newspaper and, while any bankruptcy filing goes on the public record, someone would have to search for it (and pay a fee) to find that record.

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?


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, no-commitment meeting, and let us guide you to regaining your financial footing.

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