Filing for bankruptcy has been used as a last resort in the past two years than at any time in recent memory. As a result, the stigma associated with it has diminished. In some circumstances, filing is the most appropriate course of action, bit a careful analysis of your situation and resources must be undertaken first.

Note about the author and disclaimer: I have a Canadian Law degree and certification in the Canadian Securities Course 1 & 2, as well as the Full Life Licensing Qualification Program, and Conduct and Practices Handbook. I am NOT a lawyer or a financial advisor, however. Above all, contact your financial advisor and/ or get a consultation from a bankruptcy and insolvency attorney as soon as you can when you fear you will be unable to meet financial obligations.

Insolvency vs Bankruptcy

When a legal entities financial liabilities exceed their assets, they can be said to be insolvent. A legal entity can be either a corporation or a human being. Typically, when a business no longer can meet financial oblications because debts exceed assets, declaring bankruptcy is a likely outcome.

Basic Options

The inital considerations for either a business or a private citizen, regarding whether one should declare bankrupty are:

a) Whether new sources of financing can be found

b) Whether new sources of income can be found. For example, how much more could you work (at least in the short term)? How many more clients could you handle? Figure that out. Then do whatever you can to organize your schedule so that you can increase productivity, even if in that would only be sustainable in the short term. The key is to not be instantly forced into bankruptcy and gain time to consider options or get your affairs in order.

c) Whether expenditures and overhead can be limited to the point where the balance sheet is "in the black" and one is no longer insolvent. Note that this is an underutilized consideration. For example, do you have any expensive potentially unhealthy behaviors? When a full accounting of expenditures is completed, most people discover they can make significant reductions (this concept could be a whole article series).

Consumer Proposal

Your creditors will usually prefer getting something from you rather than nothing. For individuals, depending upon where you live, there will often be non-profit agencies that can help you with this option. Note that is a serious decison to undertake. Your credit rating and ability to find financing will be impacted significantly.


A bankruptcy can be a necessary process that can profoundly reduce stress. Keep in mind that you need money to file for bankruptcy, though. Depending on your circumstances and jurisdiction, it could even cost several thousand dollars to complete the process when legal fees are considered. In addition, in most jurisdictions, your credit rating will be profoundly lowered for 7 years beginning from the point you EMERGE from bankruptcy proceeding, not when you begin.

In general, work closely with your financial and legal professionals (where appropriate), consider consumer credit couselling and putting together a consumer proposal before filing for bankruptcy, at least if you are a human (vs corporate ) person. These are serious decisions, for people facing financially dire circumstances, but I hope this article illustrates that there are options, many of which are much more common and destigmatized in this post-recession era.

Build well,