6 Reasons Bankruptcy Is Not an Easy Way Out of Debt

Deciphering the Complexities of Bankruptcy: 6 Crucial Insights

Financial turmoil can often push individuals towards the brink of bankruptcy. However, declaring bankruptcy is not a simple escape route from debt, especially in Vancouver, BC. This article aims to highlight the complexities and potential drawbacks that can arise while filing for bankruptcy.

Understanding Bankruptcy: A Brief Overview

Bankruptcy is a legal procedure, often considered as a last resort to manage overwhelming debts. It provides the debtor with a chance to start anew by discharging certain debts. However, the process of declaring bankruptcy and its consequences are not as straightforward as they seem. It is crucial to understand the intricate details and potential repercussions before considering this path.

Contact our team of experts at Bankruptcy Canada to get a comprehensive understanding of the bankruptcy process in Vancouver, BC, and its surrounding areas, including Coquitlam and Westminster.

Reason 1: The Potential Risk to Your Assets

Declaring bankruptcy in Canada comes with its fair share of consequences. One of the most significant impacts is the potential risk to your assets. The bankruptcy process involves the liquidation of certain assets under the supervision of a Licensed Insolvency Trustee. These assets are categorized into three types:


Tangible Assets:
These are physical possessions such as furniture, vehicles, and clothing.

Real Estate:
This includes your primary residence and any other real estate you own.

Intangible Assets:
These are non-physical assets, such as financial accounts or insurance policies.


Upon declaring bankruptcy, the following assets may be seized:

  • Cash, non-registered investments, registered education savings plans;
  • Your primary residence (if the equity is greater than $10,783);
  • Real estate that isn’t your primary residence;
  • A vehicle worth more than $7,117 (that has equity);
  • Artwork;
  • Jewelry.

However, certain assets are exempted from seizure:


  • Furniture and appliances up to a maximum value of $14,180;
  • A vehicle, if the equity in it is less than $7,117;
  • Your home, if the equity is less than $10,783;
  • The tools of your trade or profession, up to a maximum value of $14,405;
  • Registered pension plans;
  • Certain insurance policies;
  • RRSPs, except for contributions made in the year before filing bankruptcy.

Reason 2: Adverse Impact on Your Credit Score

Filing for bankruptcy can significantly impact your credit score. Although rebuilding your credit score is possible post-bankruptcy, it requires substantial effort and time. A low credit score may also limit your borrowing capabilities in the future, affecting significant life events such as buying a house or a car. If you manage to secure a loan with a low credit score, it is likely to come with higher interest rates and smaller loan amounts.

Reason 3: Potential Repercussions on Your Career

While bankruptcy is not grounds for termination in Canada, it may still impact your employment in various ways. Certain job roles may require you to disclose your bankruptcy status, which could potentially affect your tasks at the workplace. For instance, if you work as a financial consultant, your professional advice may be viewed with skepticism post-bankruptcy. Additionally, some employers may conduct a credit check before hiring or ask about your bankruptcy status.

Reason 4: Not All Debts Are Discharged

A common misconception about bankruptcy is that it discharges all debts. However, only unsecured debts like credit card bills, overdue bills, and unsecured lines of credit are discharged. Secured debts such as car loans, mortgages, and child support cannot be discharged through bankruptcy. If you maintain possession of these assets post-bankruptcy, you are still obligated to repay the remaining loan or mortgage.

Reason 5: Potential Impact on Your Spouse

If you have personal debts for which you are the sole owner, your spouse will not be affected by your bankruptcy. However, if your spouse has co-signed any of your debts, they become equally liable for the debt. Also, if you have a shared credit card connected to your main credit account with your spouse, your spouse may be held responsible for the accrued debt, regardless of who spent the money.

Reason 6: Mandatory Payments Post-Bankruptcy

Bankruptcy provides debt relief but does not absolve you from making payments. You are required to make Surplus Income payments to your Licensed Insolvency Trustee based on your monthly net income and the number of dependents in your household.

Exploring Alternatives to Bankruptcy

Feeling cornered by your financial situation? Fear not. We, at Bankruptcy Canada, are here to help you explore all debt relief options.

Some common alternatives to bankruptcy include:

Debt Consolidation

This involves merging multiple debts into one. An existing or new lender lends you the amount required to settle your debts, simplifying your outstanding debts and potentially reducing your interest rates.

Consumer Proposal

This is a legally binding arrangement that helps individuals repay their unsecured debts. It allows you to repay a portion of your unsecured debt over a period of no more than five years. Compared to bankruptcy, a consumer proposal has less of a negative impact on your credit report and may enable you to retain assets that could be lost in bankruptcy.

Contact Bankruptcy Canada for Financial Guidance

At Bankruptcy Canada, we offer customized solutions and action plans to manage your debt load effectively, be it personal, business, or tax debt. Whether you want to learn more about bankruptcy or other debt relief solutions, our financial experts are here to guide you through your financial challenges in Canada. Reach out to us today to learn more or to schedule a free consultation!

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.