Alternatives to Bankruptcy in Canada

For many Canadians, bankruptcy is a last resort but also an essential method of gaining debt relief and the peace of mind you deserve. It is important to know, however, that there are various alternatives to bankruptcy that should be explored before filing bankruptcy.

At Spergel, our experienced team of trustees will help to explain the different available options for overcoming unmanageable debts. In fact, we will do our best to ensure you do all you can to avoid bankruptcy.

Which bankruptcy alternatives exist?

There are a number of alternatives to bankruptcy in Canada, namely the following methods of debt relief:

  • Budgeting to repay debts
  • Using a debt consolidation loan to refinance debts
  • Having a debt management plan for repayments
  • Settling with your creditors informally
  • Filing a consumer proposal to repay debts and avoid bankruptcy

Each of these bankruptcy alternatives is suitable for different situations, and of course, each form of debt relief has its own advantages and disadvantages. During your free consultation, we can help to walk you through the best options for your financial circumstances.

Alternatives to bankruptcy

The following bankruptcy alternatives are well worth exploring before committing to filing bankruptcy, and in most cases, one of the following will help bring you debt relief.


Overwhelming debts vary from person to person. For some, taking on debt management may be possible without assistance by having a budgeting plan. If you think it is possible to pay off your debts alone, this is an option worth exploring. The best approach is assessing your income against the debts you need to pay off. You can then draw up a budget with the monthly payments you will need to make over a time period. If your debts will not be paid off with reasonable monthly payments for over five years, it is worth considering another form of debt relief.

Debt consolidation

A debt consolidation loan is a loan that combines multiple separate outstanding loans into a single loan. It has the aim of simplifying debts owed, as you will have just one consolidation loan to pay off. Another key advantage of a debt consolidation loan is that in most cases, it will have a lower interest rate than most other debts. You may also be able to increase the term of the loan to gain longer to pay it off. Although anyone can apply for a debt consolidation loan, the down sides are that an interest rate will apply and not all debts may be included, depending on your lender.

Debt management plans

A debt management plan is a bankruptcy alternative that consolidates your monthly debt payments without the requirement for a new loan. They can be filed through a credit counselling organization, and are ideal for those looking to consolidate smaller debts. Debt management plans are a good option if you struggle with poor credit and would find it difficult to obtain a low-interest debt consolidation loan through a regular lender. While it is possible to get a low interest rate with a debt management plan, you will not receive debt relief like you would when filing bankruptcy as you are still required to pay off your debts in full.

Debt settlement

If your debts are relatively small, informal debt settlement with your creditors may be a worthy alternative to bankruptcy. This method of debt relief is particularly effective if you have been struggling with your debts for a while, and if they were taken out some time ago. In this scenario, it could be possible to reduce the amount of debt you owe your creditors.

Consumer proposal

Filing a consumer proposal is a common method of avoiding bankruptcy. A consumer proposal is an interest-free repayment option with various benefits. It brings about a stay of proceedings which protects you from creditors; you may keep your assets; and it can reduce the debt you owe by up to 80%. It is important to note that a Licensed Insolvency Trustee is required for filing a consumer proposal. They will be able to negotiate with your creditors and usually gain a very low settlement for you. This is often because creditors would rather receive some payment rather than less when filing bankruptcy. Learn more about filing a consumer proposal.

Debt Repayment Calculator

Reduce your debt by up to 80%

At Spergel, we have helped Canadians begin a fresh financial future for over 30 years, and we are here to help you too.

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Book your free phone consultation with our caring team to discuss your options and start your journey towards financial freedom.

Book a free consultation

Book a free consultation with one of our experienced Licensed Insolvency Trustees who will walk you through the alternatives to bankruptcy. At Spergel, you will receive your own dedicated trustee for your entire debt relief journey. Get in touch – you owe it to yourself.

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