Many People Can’t File for Bankruptcy in Canada and Need Alternatives

Alternatives to Bankruptcy For Those That Cannot Go Bankrupt

Many debt relief programs have rightly become the equivalent of the Monopoly get out of jail card in the financial world.

Ultimately, the clue is in the name.

A plan that offers to relieve individuals from their debts provides a fresh financial start.

For individuals who are overwhelmed by debts and can’t find a way out to repay their creditors, filing personal bankruptcy can offer some much-needed peace of mind.

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In bankruptcy, you could get debt-free in as little as 9 months once you’ve paid the necessary costs.

When collection agencies call you every day and face legal pursuit from your creditors, the prospect of becoming debt-free in under a year can be appealing.

Unfortunately, only 10% of clients who consult a licensed insolvency trustee — the only financial expert authorized to administer insolvency plans – qualify for personal bankruptcy.

For most customers, bankruptcy isn’t a suitable option.

It doesn’t mean that you can’t find a way out of debt.

On the contrary, working closely with your trustee allows you to develop a debt relief plan that fits your situation.

Here are some of the most popular options for those who can’t file personal bankruptcy:

What is bankruptcy, and what does it do?

Personal bankruptcy is a legal process that is administered by a licensed insolvency trustee.

The trustee is the only expert authorized to manage your personal bankruptcy program.

Indeed, a trustee is licensed by the OSB, Office of the Superintendent of Bankruptcy, and follows federal regulations to manage your insolvency plans.

Bankruptcy provides immediate debt relief as it prevents creditors and collection agencies from contacting you.

Lawsuits, either in progress or in preparation, are stopped.

The same applies to wage garnishment, payment collection, and even the sale of your assets by creditors.

When you go bankrupt, you don’t repay your debts, but you need to cover the cost of bankruptcy, which is $1,800.

There are, however, exceptions that can exempt you from paying the bankruptcy cost if you are unable to afford it.

The bankruptcy can be repaid in as little as 9 months, at a $200 payment rate per month.

At the end of which, the debt is eliminated from your credit report and forgiven.

However, the debt management program still appears in your report for several years after the end of the process.

The bankruptcy affects your credit score, as those who file receive a credit rating R9.

But it also puts you in a better position to rebuild your credit rating and your financial stability when you are debt-free.

Why can’t you file for bankruptcy?

While personal bankruptcy is an ideal debt management solution when you can’t pay your creditors what you owe, it also has strict eligibility criteria.

To file personal bankruptcy, you need to meet the following requirements:


  • Low income;
  • High debts;
  • No assets.


Therefore, there may be many different reasons why your trustee will not go forward with personal bankruptcy.

For example, if you have many assets, these can be sold to repay your debt.

In other words, you don’t need to declare bankruptcy as you are the means to meet creditors’ repayment.

The trustee considers all sorts of assets during your financial assessment, including your vehicle, home equity, RRSP contributions, and the tools of the trade.

While most assets can be sold, you can refuse to sell.

In this case, you will need to pay the trustee the amount creditors would have received otherwise.

If you can’t afford to pay, the assets are likely to be sold.

However, your trustee will make exceptions.

An asset that is necessary to rebuild your financial stability, such as the tools you use in your profession or the vehicle you need to get to work, may not be sold.

Some provinces also allow homeowners to keep an amount of home equity despite filing for bankruptcy.

Your trustee compares your household income to the federal guidelines for a household of your size.

If your income is higher, you may have to pay 50% of the surplus income toward your debt every month for 21 months.

Depending on the worth of the surplus, you could be able to repay your debt, partially or entirely, which makes filing a personal bankruptcy irrelevant.

Secured loans, some unsecured loans, and student loans if you left college less than 7 years ago are not suitable for personal bankruptcy.

Consequently, the amount of debt you can declare in bankruptcy may be lower than you think, which means you don’t qualify for the program.

Lastly, your career may be an obstacle to filing for bankruptcy.

Your job might require a high security clearance if you work in law enforcement or a financial role.

You may also be licensed by a professional association.

Both factors make it impossible to file bankruptcy without putting your job at risk.

What are bankruptcy alternatives?

If you can’t file for bankruptcy, there are suitable bankruptcy alternatives that can help you with debt relief and debt management.


  • The consumer proposal is a legal process that is administered by a trustee to cancel your debt. When you file a consumer proposal, you repay only a small amount of your debt for up to 5 years, but your debts are forgiven.
  • A debt consolidation loan is an effective debt management solution for individuals with high income and valuable assets that can act as collateral for the loan.
  • A debt settlement program is negotiated with your creditors to repay a reduced amount towards the debt. You can negotiate the payment terms yourself or entrust a debt settlement agency to do so (but beware of surprise costs when working with an agency!).
  • The credit counselling debt management program presents a payment term with a reduced interest rate to repay your debt in full. Credit counselling companies typically provide free consultations to evaluate your financial situation.


What’s the next step for me?

When personal bankruptcy doesn’t work, you need to review your options with a trustee.

Licensed insolvency trustees are regulated by the government to provide confidential, objective, and reputable debt relief advice.

You may be able to repay your debt with finance management and budgeting tips, for instance.

If you need additional support, alternative bankruptcy programs are also available to help you become debt-free.

Bankruptcy doesn’t work for you?

Call (877) 879-4770 24/7 to assess your options in all confidence with a trustee.

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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