Unmanageable Debt is a Solvable Problem. So Let’s Discuss Solutions.

“I’ll never get out of debt.”

Have you ever thought or said those words before?

If so, you’re definitely not the first person.

There’s no denying that many individuals and families are struggling financially right now, more than ever.

If you are one of the many Canadians that feel like they just can’t get out of their unmanageable debt, take a breath, and read this.

There is help, and there are solutions to your debt, regardless of how unmanageable it may feel right now.

Is bankruptcy your only option?


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It is one solution of many, and it may end up being the best choice for your unique financial situation but it may not be the right option.

The majority of Canadians who are insolvent in 2020 have decided to file for consumer proposals rather than declare bankruptcy.

The biggest difference between deciding how to choose between the two is whether your debt is unsecured or secured debt.

So, what does that mean?


  • Unsecured debt is the type of debt where there is no collateral or guarantor. In laymen’s terms, there’s no specific asset to back up the debt. The most common types of unsecured debt is that of credit cards.
  • Secured debt is debt which is backed up by a real and tangible asset. The typical secured debt is a mortgage or a vehicle loan. Other secured debt assets might be something like an RV loan or a boat loan.


Those who have substantial unsecured debt may often choose a consumer proposal, especially when they are able to keep on top of paying their vehicle loan payments or mortgage.

However, if most of your debt is backed by collateral or assets, then you may want to choose the bankruptcy route.

A Licensed Insolvency Trustee (LIT) can help you understand which option is ideal for your scenario, and may even advise you to look at informal options.

Informal solutions to your debt problems

Informal options are fantastic if you think you may be able to get on top of your debt without needing legal intervention.

They may include the following:


  • Selling assets to pay back the debt.
  • Consolidating your debt directly with your creditors without a legally binding agreement.
  • Reworking your budget to reduce your costs and allow you to more aggressively pay back debt.


If you decide to go the route of informal debt solutions, they don’t come without drawbacks.

First, since they are not legally binding, you will need to make sure that any actions you take to reduce your debt are documented in writing.

The second disadvantage of informal debt solutions is that it is solely up to you as an individual to make sure the assets you sell actually help reduce your debt, and you need to be able to reduce your monthly budget to adequately help you pay back your debt.

It may be difficult, but if you get on top of your debt early enough, it is possible to pay back your creditors without legally binding agreements.

Formal solutions to unmanageable debt

While informal solutions might have worked for a short period of time, when debt becomes harder to deal with, it’s time to focus on the formal solutions.

Trying to get out of debt on your own can work if it’s manageable, but when it turns to unmanageable, you will want to use your resources along with the guidance of a credit counselor or Licensed Insolvency Trustee to make the most informed decision you can regarding what actions to take.

Not all solutions are created equal.

Ultimately, formal options are legally binding for both you and your creditors and are government-legislated options.

What are the two commonly used formal options in Canada?

Consumer proposals and declaring bankruptcy are the two that you will likely come across while doing your research.

Consumer proposal

What is a consumer proposal?

Well, it’s one of the most popular ways for Canadians to deal with unmanageable debt.

In short, a consumer proposal is a legally binding agreement in which your debt is either decreased, or you are allowed to pay back the debt in a slower fashion than initially agreed upon.

The one drawback is that it is for unsecured debt only.

If you think this is the best option for you, you’ll need to reach out to a Licensed Insolvency Trustee.

Canadian courts require that this is filed by a trustee, rather than the individual in debt.


Bankruptcy isn’t always the right choice when you are insolvent, but if a consumer proposal does not fit your needs, bankruptcy may be the alternative you decide to go with.

Just as with the consumer proposal process, a bankruptcy must be filed on your behalf by a Licensed Insolvency Trustee.

A common misconception about bankruptcy is that all your assets will be repossessed, or sold off.

This simply isn’t true.

While some of your assets may be sold, you will likely be able to keep many of your assets, such as clothing, tools for your line of work, and so on.

A bankruptcy is not intended to create a life in which you need to re-purchase necessities since the goal is to erase your debt, pay back creditors as much as possible, and have you move forward with a  budgeted lifestyle.

Each of these legally binding options will offer several benefits including the following:


  • An overall reduction in the debt you owe.
  • Creditors harassment ends.


Are there disadvantages to filing for either of these?

Yes, of course.

The most obvious one is that your credit will be negatively affected for several years after filing for either these.

However, it is likely your credit score was not doing so great if you were consistently making late payments or missing them entirely.

The process of building back up your credit after filing for either of these formal agreements will not happen overnight, but your credit counselor can advise you on how to go about building up your credit again while continuing to stay within your budget.

The absolute best choice you can do is to sit down with a debt professional so you can get the details of how each of these choices, whether it’s informal or formula options, work for you.

If you are in need of a financial solution to unmanageable debt, reach out to our debt experts at Bankruptcy Canada to set up a no-obligation consultation.

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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