A February 2025 Globe and Mail article by Erica Alini highlights a curious and concerning trend: fewer Canadians are filing for bankruptcy, even when it might be the most effective way to regain financial footing. Instead, most people are opting for consumer proposals, a legal process that allows them to negotiate lower debt payments over a longer period.
While both options provide relief from creditor collections, there are misconceptions about bankruptcy that often cause people to overlook it as a viable path forward.
Why the Hesitation?
There are several reasons Canadians shy away from bankruptcy, even when it may be the right move:
- Shame and stigma: Bankruptcy carries a social weight that proposals often do not. Many fear judgment from family, friends, or society at large.
- Misunderstanding of options: People may assume proposals are automatically better because they allow them to keep assets like their home or car, but that’s not always financially advantageous.
- Fear of the unknown: Bankruptcy is a legal process and can feel intimidating. Misconceptions about losing all possessions or the length of the process can delay action.
As the article notes, government data shows a dramatic shift from 20% of debtors filing consumer proposals in 2009 to nearly 80% in 2023, even though many of those who file proposals might be better served by a bankruptcy depending on their specific situation.
The Risk of Waiting
Hesitation can come at a real cost. Carrying unmanageable debt longer than necessary can worsen financial strain, damage credit, and increase stress. Acting sooner can:
- Reduce the total amount you have to repay.
- Shorten the timeline to a fresh start.
- Limit the emotional toll of ongoing debt stress.
At Faber, we see firsthand how delaying action often makes solutions more complex. But there’s good news: taking the first step, even just to understand your options, can be profoundly empowering.
Knowing Your Options
Canada offers two main paths for insolvency: bankruptcy or a consumer proposal. Both are administered by licensed insolvency trustees (LITs), who ensure your rights are protected.
- Bankruptcy: Typically, best for those with lower incomes and fewer assets, bankruptcy allows for a faster, simpler resolution. Payments may be minimal and certain assets are exempt. First-time filers can often complete a bankruptcy in 9–21 months.
- Consumer proposal: Allows you to negotiate repayment terms with creditors over up to five years. Proposals may make sense for those with higher incomes and greater assets, but they aren’t always the most cost-effective choice.
The key is clarity. Understanding how each option affects your finances, assets, and long-term stability is crucial.
The Faber Advantage
Financial stress is challenging, and it can feel isolating, but you don’t have to navigate it alone. At Faber, we help Albertans explore their options calmly and without judgment. We guide people toward solutions that work best for their unique situation, whether that’s a consumer proposal, bankruptcy, or alternative strategies.
Facing debt early can be the most important step toward regaining control and moving forward with confidence. There’s no shame in seeking help; it’s the first step to a fresh financial start.
This blog references an article from Erica Alini, “Good for creditors, bad for debtors: Not enough Canadians are filing for bankruptcy, new research argues,” The Globe and Mail, February 18, 2025. https://www.theglobeandmail.com/investing/personal-finance/article-good-for-creditors-bad-for-debtors-not-enough-canadians-are-filing-for/
