Why You Shouldn’t Write Off Bankruptcy As An Option

Why You Shouldn’t Write Off Bankruptcy As An Option

Most people shudder at the thought of filing bankruptcy. And that’s fair.

Bankruptcy is a big step that should only be taken when all other options won’t work.

Most people who reach out for help with overwhelming debt would prefer to avoid bankruptcy. That’s why Consumer Proposals have become so popular – they're an alternative to bankruptcy for people in serious financial distress. However, a Consumer Proposal is not always a good option, depending on a person’s situation. Sometimes, the only realistic option is bankruptcy.

As a Licensed Insolvency Trustee (sometimes referred to as a Bankruptcy Trustee), we regularly advise individuals on their options for dealing with overwhelming debt. Sometimes, it becomes clear that the only viable option is bankruptcy, but this is often a hard pill for the individual to swallow. There's major stigma associated with the word “bankruptcy”, but this is a symptom of the real issue: the misconception that bankruptcy permanently ruins a person's financial future.

While bankruptcy does have significant consequences, it is not necessarily the end of an individual’s financial life. Here are some facts that challenge the misperceptions about bankruptcy:

  1. The reason federal laws exist allowing people to file a bankruptcy is to allow for a financial re-set when a situation has become unsustainable. This doesn’t just give the individual involved a fresh start, it serves the national interest by reducing reliance on public assistance and allowing people a chance to contribute positively to the economy in the future.
  2. Bankruptcy is meant to be rehabilitative. Not only does it allow people relief from the debt that makes it impossible for them to pursue important financial goals, it gives them an opportunity to access financial counselling from a trained professional. Most people learn from the mistakes that might have led them to bankruptcy and make meaningful changes.
  3. The negative impact on an individual’s credit rating is temporary, and it will be possible to obtain credit (even at good interest rates) again. A first-time bankruptcy will stay on an Albertan’s credit report for six years after they’re discharged, but this doesn’t necessarily mean they won’t get credit during that time. Lenders look at many factors, and they can be convinced to put their trust in a person who has been bankrupt but has a good financial outlook.
  4. People don’t lose all of their assets in bankruptcy. Provincial laws in Alberta allow individuals to keep certain assets that are deemed to be important not only for survival (like clothes, food, and personal effectgs), but also to take care of themselves and carry on working while in bankruptcy and beyond (such as a car or home that's not highly valuable, certain tools of the trade, and RRSPs).
  5. Bankruptcy doesn’t necessarily harm your employment prospects. Unless you require bonding, handle trust funds, or are a corporate director, it’s unlikely that your bankruptcy will directly impact your employment. And while bankruptcy can impact your reputation, sometimes indirectly impacting your employment, that’s only if people find out about it. Most bankruptcies aren’t advertised publicly and aside from your creditors (who will get notice of your bankruptcy), most people will never hear about it unless you tell them. You’d probably be surprised to learn that you already know some people who’ve been bankrupt.

Bankruptcy isn’t usually (and shouldn’t be) the first choice for dealing with debt. However, when alternative options, such as consolidation loans, consumer proposals, or payment plans aren’t feasible, it is an option you should at least be willing to consider. The best way to know which options are feasible for you is to contact a Licensed Insolvency Trustee for a consultation.

Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the southern Alberta region. We regularly help individuals review their options for dealing with overwhelming debt. If you'd like to explore these options, please reach out to 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

Absolutely. A Licensed Insolvency Trustee can talk to you about an array of options, including a Consumer Proposal. There may be some options that are not realistic for you, based on your situation. A Licensed Insolvency Trustee will meet with you and go over the options, helping you figure out which options are realistic for you and which one is the best to deal with your debt. Contact us to book a meeting to find out more.

Bankruptcy is a legal way to get some or all (depending on your financial situation) of your debt forgiven when you can't pay it. For more information, see our bankruptcy page or contact us.

A Licensed Insolvency Trustee is your best resource to discuss whether a Consumer Proposal is right for you. For general information on Consumer Proposals, check out our Consumer Proposal page. However, the best way to find out what a Consumer Proposal would look like for you is to book a free consultation with a LIT.

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.

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.

An individual who has made an assignment in bankruptcy, or otherwise has been adjudged or deemed bankrupt, and who has not yet received their official discharge from bankruptcy is considered an "undischarged bankrupt". An undischarged bankrupt cannot act as a director of a corporation or obtain credit, and will have bankruptcy obligations that remain ongoing.

If you have been bankrupt and are unsure whether you have been discharged from the bankruptcy, you can find out by conducting an insolvency records search on the Office of the Superintendent of Bankruptcy's website. To do so, you must create an account and pay a fee, which is currently set at $8. Another option is to call your Trustee to find out.


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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