The reality of personal bankruptcy: What to know and expect

Freida M. Richer

Licensed Insolvency Trustee

Man seated at a desk contemplating filing personal bankruptcy
Freida M. Richer

Licensed Insolvency Trustee

When you think of bankruptcy, what’s the first thing that comes to mind? Do you think of the formal process that gives people a fresh start by resolving overwhelming debt? Or do you think about how it might make you feel embarrassed, guilty, ashamed, or even afraid? 

If bankruptcy is a legitimate process that helps Canadians gain relief from overwhelming debt, why is it viewed as shameful or embarrassing? Let’s get real about bankruptcy, starting with understanding your alternatives and the six things you should know before filing for bankruptcy. 

What’s the stigma around bankruptcy?

The main stigma that surrounds bankruptcy is that it only happens to people who are bad with money. This isn’t true—financial difficulties can happen for a variety of reasons such as job loss, health issues, unexpected expenses, or relationship troubles. Nonetheless, social stigmas lead many to fear what their friends or family will think if they declare bankruptcy. 

In reality, we’re our own worst critics. While it’s normal to worry about what others will think, it’s important to realize you aren't alone in your struggle with debt. Many Canadians (and likely many people you know) are struggling to manage their debt, with 22% of Canadians $100 or less away from not being able to meet their financial obligations.  

Your friends and family members might be more understanding than you think. A great way to minimize the stigma is to bring a loved one with you to your initial consultation. Not only will they be present for support, but also to learn more about how to process works. 

What are alternatives to bankruptcy?

A common alternative to bankruptcy is a consumer proposal. At Grant Thronton, many clients choose to file a consumer proposal as a customizable solution to best fit their emotional, social, and financial situation. Whether it’s job loss, lack of assets, not qualifying for a consolidation loan, or simply avoiding the stigma tied to bankruptcy, many choose to file a consumer proposal as an alternative remedy to their debt problems.   

A consumer proposal is an offer to your creditors to repay a portion of the debt you owe. Once accepted, consumer proposals can provide fixed and lower payments. This means that you could make a single, interest-free payment each month that is based on what you can afford. A reduced monthly payment, spread out over a maximum of five years, allows you to keep your assets, stay consistent, and find financial freedom. It’s not uncommon for debts to be reduced by up to 80%! 

Learn why consumer proposals are become the more attractive option for debt relief.

What you should know before filing bankruptcy

If you’re thinking about filing for bankruptcy, it’s important to know what to expect and understand your requirements. 

Your income is protected. Once a bankruptcy is filed, creditors can no longer contact you or garnish your wages. 

Some assets may be protected under provincial law. In Canada, each province has a set of rules that determines which assets you can keep if you file bankruptcy. These are called exempt assets. If you have assets that aren’t exempt, your trustee is required to recover the value of those assets for your creditors. 

Bankruptcy will negatively impact your credit rating. Your bankruptcy will be reflected on your credit report for six or seven years (depending on your province) after you’ve been discharged. This period increases to 14 years for a second bankruptcy filing. 

Not all debt will be wiped out. This includes student loans (depending on when you left school), outstanding child or spousal support, court-imposed fines, debts arising from fraud, misrepresentation, or embezzlement, and civil assault claims. 

You won’t be able to use your credit cards. All credit cards will be turned over to your trustee at the beginning of your filing. 

You must complete two financial counselling sessions. Determining and acknowledging the root causes of insolvency is a critical step in improving your money management skills. Counselling sessions promote positive change in how you handle your finances and will help set you up for success as you enter life after debt.  


If you’re struggling with overwhelming debt and experiencing financial stress, there’s no shame in considering bankruptcy. Though bankruptcy can provide a financial fresh start, it’s important to learn about all your debt relief options before making a decision. The best place to start is by speaking with a Licensed Insolvency Trustee. Book your free, no-judgment consultation and start the road to debt freedom today. We look forward to helping you find the right debt solution. 

About the Author

Freida M. Richer

Licensed Insolvency Trustee

Take the first step to debt freedom

Speak to one of our debt solutions professionals during a free, no-obligation consultation.

Related articles

Loading