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Bankruptcy Alternatives - Legal Options That Can Help You Avoid Bankruptcy
- Senga Bailey
- Oct 20
- 6 min read
When you’re weighed down by debt, it can feel like bankruptcy is the only option. The thought of losing control of your finances, your assets, or even your peace of mind can be overwhelming. But here’s the good news: bankruptcy isn’t your only choice. In fact, many Albertans find relief through practical, legal alternatives that allow them to manage debt without taking such a drastic step.
If you’re hesitant about declaring bankruptcy, you’re not alone. A recent survey found that nearly half of Canadians (46%) are just $200 or less away from being unable to cover their bills. This financial pressure often sparks fears of bankruptcy, but in many cases, other solutions may be more suitable, less damaging, and still highly effective.
In this article, we’ll explore some of the most common bankruptcy alternatives in Alberta, with options designed to help you regain control, protect your future, and reduce stress without the long-term consequences that bankruptcy can bring.
Why Look for Alternatives to Bankruptcy?
Bankruptcy can be the right solution for some, but it does come with long-term consequences. For example:
Your credit report will show bankruptcy for up to 7 years (or more for repeat filings).
Certain assets, like your home or vehicle, may be at risk depending on your situation.
It can affect your ability to borrow, rent, or even apply for certain jobs.
Because of these challenges, many Canadians first explore other legal debt relief options, as mentioned below.
Practical Bankruptcy Alternatives for Albertans
1. Consumer Proposal
A consumer proposal is one of the most widely used bankruptcy alternatives in Canada. It’s a legally binding agreement arranged through a Licensed Insolvency Trustee (LIT). Here’s how it works:
You and your LIT propose to your creditors that you’ll pay back a portion of what you owe, often over five years.
Once the proposal is accepted, interest stops accumulating, and creditors can’t pursue collection actions.
You make one affordable monthly payment based on what you can reasonably afford.
Consumer proposals have grown in popularity across Alberta, with recent data showing they now outnumber bankruptcies. That’s because they allow people to reduce their debt, keep their assets (including a home or car, in most cases), and rebuild their finances with dignity and less stigma.
2. Debt Consolidation
Debt consolidation involves taking out one larger loan to pay off several smaller debts. Instead of juggling multiple due dates and interest rates, you’ll have a single monthly payment. This is often at a lower interest rate than what you’re currently paying.
Consolidation works best if you still have a decent credit score and steady income. While it doesn’t reduce the amount you owe, it simplifies repayment and may save you money in interest charges.
3. Non-Profit Credit Counselling and Orderly Payment of Debt
Sometimes, the best step is to talk to a certified credit counsellor. Through non-profit credit counselling agencies, you may be able to enroll in an Orderly Payment of Debt:
Your counsellor negotiates with creditors to reduce or eliminate interest charges.
You make one consolidated monthly payment to the agency, which then pays your creditors.
For Albertans feeling overwhelmed but not yet in severe financial distress, credit counselling can be a gentle first step toward regaining control.
4. Informal Negotiation with Creditors
Sometimes, simply reaching out to your creditors directly can open doors. Many lenders are willing to discuss repayment plans, reduce interest rates, or extend timelines, especially if it increases their chances of getting paid.
While this option doesn’t stop legal actions or collection efforts the way a consumer proposal does, it can still provide relief if your financial challenges are temporary.
Quick Comparison of Bankruptcy Alternatives
Learn More: Government of Canada website
If you’re unsure which option is right for you, call SCB Debt Solutions at 403-261-7779 or contact us today to book a free, confidential consultation and explore the debt relief solutions that best fit your situation.
Choosing the Right Path Forward for You
Deciding which alternative works best depends on your circumstances. Ask yourself:
How much debt do I have?
What assets do I want to protect?
How steady is my income?
How quickly do I want to be debt-free?
A Licensed Insolvency Trustee or a credit counsellor can help you weigh your options without judgment. Their role is to give you the facts and guide you toward the solution that aligns with your goals.
Breaking the Stigma Around Debt
It’s important to remember that struggling with debt doesn’t mean that you have failed. Life happens. Whether it’s job loss, medical expenses, or inflation, unexpected emergencies can affect anyone. In fact, Statistics Canada has reported that the average Canadian household debt-to-income ratio remains above 180%, meaning many people owe far more than they earn in a year.
Debt is a widespread issue, and seeking help is a sign of strength. By exploring alternatives to bankruptcy, you’re taking a proactive step toward a secure financial future.
This Doesn’t Mean Bankruptcy Is a Bad Option
While this article focuses on alternatives, it’s important to remember that bankruptcy itself is not a bad option. For some people, it may be the most effective and realistic solution to eliminate overwhelming debt and finally start fresh.
What matters most is that you understand all the options available to you, whether that’s a consumer proposal, debt consolidation, or bankruptcy, and choose the path that best fits your financial situation.
The best solution is the one that gives you peace of mind, stops the stress, and sets you up for long-term success. That’s why speaking with a Licensed Insolvency Trustee is so valuable: they’ll walk you through every legal option and help you make an informed choice. Read what one of our clients said:
“I am very pleased with the service I received from this office over the last 6 years. They were nothing but kind and patient when I would have financial struggles and missed payments, and never made me feel bad about it. Highly recommend using this company for any consumer proposal or bankruptcy needs.”
Having the right guidance ensures you’re not only following the right legal option but also feeling supported every step of the way. Also Check:
FAQs on Bankruptcy Alternatives
What can I do instead of declaring bankruptcy?
You can consider a consumer proposal to repay part of your debt, a debt management plan to consolidate payments, or negotiate directly with creditors. If you’re based anywhere in Alberta, you can simply book a free, confidential consultation, and our Licensed Insolvency Trustee can help you choose the best option for your situation.
How is a consumer proposal different from bankruptcy?
Unlike bankruptcy, a consumer proposal allows you to repay a portion of your debt while keeping most of your assets. Bankruptcy eliminates most debts but can affect credit longer and may require surrendering certain assets. Check this article “Consumer Proposal vs Bankruptcy” to learn more.
Are debt consolidation loans a safe alternative to bankruptcy?
Debt consolidation loans involve securing a personal loan to pay off multiple debts, simplifying payments into one monthly amount. However, they do not provide legal protection from creditors or stop interest accumulation. These loans are best suited for individuals with manageable debt, a stable income, and a good credit score. Unlike consumer proposals or bankruptcy, they do not offer formal debt relief or asset protection.
