--- title: "The reality of personal bankruptcy: What to know and expect" date: 2018-09-19T11:42:21-04:00 author: Freida M. Richer canonical_url: "https://grantthorntonlimited.ca/en/debt-help-resources/articles/the-reality-of-personal-bankruptcy" section: Articles --- [ Back to the hub ](https://grantthorntonlimited.ca/en/debt-help-resources/articles) # The reality of personal bankruptcy: What to know and expect Freida M. Richer CIRP, Licensed Insolvency Trustee ![Man seated at a desk contemplating filing personal bankruptcy](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/Web-image-square/_articleHero/6523/The-reality-of-bankruptcy.webp) Freida M. Richer CIRP, 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 ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/price-shock-how-canadians-are-coping-with-the-rising-cost-of-living)$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](https://grantthorntonlimited.ca/en/debt-help-resources/articles/what-happens-when-you-meet-with-a-lit). 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](https://grantthorntonlimited.ca/en/consumer-proposal/what-is-a-consumer-proposal). At Doane 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.](https://grantthorntonlimited.ca/en/debt-help-resources/articles/why-are-consumer-proposals-becoming-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. ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/wage-garnishment-how-it-works-and-what-you-can-do) **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](https://grantthorntonlimited.ca/en/debt-help-resources/articles/what-affects-your-credit-score) 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](https://grantthorntonlimited.ca/en/debt-help-resources/articles/student-loan-debt-relief) and apprenticeship loans (depending on when you left school or finished your apprenticeship), 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](https://grantthorntonlimited.ca/en/get-in-touch/contact-us) 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 CIRP, Licensed Insolvency Trustee ## Latest articles [ ![](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbListSmall/67684/assets-CP-square.webp) ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-your-assets-in-a-consumer-proposal) [What happens to your assets in a consumer proposal? ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-your-assets-in-a-consumer-proposal) [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-your-assets-in-a-consumer-proposal) [ ![](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbListSmall/65155/recreational-vehicle-square.webp) ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-an-rv-boat-or-atv-loan-if-you-file-a-consumer-proposal-or-bankruptcy-in-canada) [### What happens to an RV, boat, or ATV loan if you file a consumer proposal or bankruptcy in Canada? ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-an-rv-boat-or-atv-loan-if-you-file-a-consumer-proposal-or-bankruptcy-in-canada) [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-an-rv-boat-or-atv-loan-if-you-file-a-consumer-proposal-or-bankruptcy-in-canada) [ ![](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbListSmall/63555/influencer-survey.webp) ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-influenced-into-debt-how-social-media-impacts-canadians-finances) [### Influenced into debt: How social media impacts Canadians' finances ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-influenced-into-debt-how-social-media-impacts-canadians-finances) [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-influenced-into-debt-how-social-media-impacts-canadians-finances) ## Subscribe to our newsletter Get tips and tools to help manage your finances and live debt free. \*I agree to receive communications from Doane Grant Thornton. I understand that I can unsubscribe at any time. ## **Take the first step** to debt freedom Speak to one of our debt solutions professionals during a free, no-obligation consultation. [ Book a free consultation ](https://grantthorntonlimited.ca/en/get-in-touch/contact-us) ## Related articles ![](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbMedium/67684/assets-CP-square.webp) ### [What happens to your assets in a consumer proposal? ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-your-assets-in-a-consumer-proposal) In most cases, a consumer proposal allows you to keep all of your assets while bankruptcy may require you to surrender certain non-exempt assets. [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-your-assets-in-a-consumer-proposal) ![Marina filled with sailboats and recreational boats along the Charlottetown waterfront on a sunny day.](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbMedium/65155/recreational-vehicle-square.webp) ### [ What happens to an RV, boat, or ATV loan if you file a consumer proposal or bankruptcy in Canada? ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-an-rv-boat-or-atv-loan-if-you-file-a-consumer-proposal-or-bankruptcy-in-canada) For many Canadians, recreational vehicles offer freedom, adventure, and unforgettable family memories. But if you’ve financed an RV, travel trailer, boat, ATV, snowmobile, or side-by-side, those monthly payments can become difficult to manage if life takes an unexpected turn. [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-to-an-rv-boat-or-atv-loan-if-you-file-a-consumer-proposal-or-bankruptcy-in-canada) ![A woman sitting with papers and a calculator in front of her](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbMedium/63201/cp-annulment-square.webp) ### [ What happens if you miss a consumer proposal payment? ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-if-you-miss-a-consumer-proposal-payment) Missing a payment during your consumer proposal can feel scary—but it’s not the end of the road. This article explains exactly what happens if you miss a consumer proposal payment, how to avoid annulment, and what to do if your consumer proposal is annulled. [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-if-you-miss-a-consumer-proposal-payment) ![A young woman sits with and supports an older woman holding a cane.](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/Web-image-square/_articleThumbMedium/58677/caregiver-article-square.webp) ### [ Tips to avoid debt as a family caregiver in Canada ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-tips-to-avoid-debt-as-a-family-caregiver-in-canada) With the rising cost of living and long waitlists for long-term care, more Canadians are becoming family caregivers, but it can come with an emotional and financial cost. [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-tips-to-avoid-debt-as-a-family-caregiver-in-canada) ![Person looking down at bills with head in hand, surrounded by paperwork and an open laptop.](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbMedium/56923/utilities-square.webp) ### [ What happens if you don’t pay your utility bills in Canada? ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-if-you-dont-pay-your-utility-bills-in-canada) If you’re worried about unpaid electricity, heating, or water bills, you’re not alone. But disconnection isn’t immediate, and you usually have options to protect your service while you get back on track. [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-happens-if-you-dont-pay-your-utility-bills-in-canada) ![A couple sits at a table reviewing bills and using a calculator, appearing stressed while looking over financial documents.](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbMedium/52267/instant-loans.webp) ### [ What are the risks of instant loans in Canada? ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-are-the-risks-of-instant-loans-in-canada) When an unexpected bill pops up or your bank balance hits an uncomfortable low, fast‑cash lenders can seem like a lifeline. Understanding how these quick loans work, and the risks hiding behind the “instant” label, can help you make choices that protect your financial health. [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-what-are-the-risks-of-instant-loans-in-canada) ![Photo of parents and adult daughter hugging and smiling.](https://pr-assets.grantthorntonlimited.ca/craftcmsimages/Article-imagery/_articleThumbMedium/53508/family-finance-1.webp) ### [ Family finance: The emotional cost of financially supporting family ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-family-finance-the-emotional-cost-of-financially-supporting-family) With rising costs, increased debt loads, and tighter budgets, many Canadians turn to family for support. But money can also strain relationships, create pressure, and sometimes lead to debt on both sides of the conversation. [ Read this article ](https://grantthorntonlimited.ca/en/debt-help-resources/articles/article-family-finance-the-emotional-cost-of-financially-supporting-family)