What I wish I knew before starting my debt relief journey

“I can’t get into more debt.”  

This was the big fear holding Angela back from contacting a Licensed Insolvency Trustee to learn more about a consumer proposal and other financial options. Angela isn’t her real name (we’ve changed it to protect her privacy), but her story is. 

The consumer proposal Angela was considering is a plan created with a Licensed Insolvency Trustee, that settles debt in a single monthly payment without any added interest. 

Angela had been considering it for some time, but she and her husband Rick (name also changed) put off getting professional help to tackle their debt because they thought the plan would cost them too much or come with high fees and interest. 

“I tried to get some debt relief back in 2020,” Angela recalled in a recent interview with us. [It was] a loan through some kind of debt agency, but you had to pay a fee and there was a lot of interest. We just weren’t confident they were there to help us.” That experience made Angela cautious. 

Then she came to Bromwich+Smith, and said that’s when things shifted for her. 

“It was incredible when we had the first conversation,” she said, adding that she was surprised how easy the process ahead would be.  

“Where are the fees? There has to be some fees in there? There must be some interest?” Angela was surprised to learn that’s not how the consumer proposal process works.  

It was a big moment of clarity, and after their first meeting with Bromwich + Smith, Angela and Rick moved forward quickly with their consumer proposal leading to a sense of peace they hadn’t thought was possible.  

“Now all that pressure is gone. We’re on track, our payments are much lower than they were before, and we can breathe easy again” said Angela, with relief in her voice. 

It’s completely normal to feel overwhelmed by debt 

Before filing their consumer proposal, Angela and Rick spent years feeling overwhelmed by debt, trying to juggle rising living costs with interest payments.  

Like many people who need support to start their debt recovery journey, the couple faced an unexpected life challenge that hit their finances hard: Angela was diagnosed with breast cancer.  

Up until that point, Rick had filled the gaps in their budget by working overtime hours, which kept him away and on the road. Once Angela began cancer treatment, he needed to be closer to home, and working less. 

With Angela on long-term disability leave, their household income fell dramatically.  

“We realized we had to start cashing in RSPs to supplement our income,” she said. “I didn’t know how we were ever going to get out of this situation, because we were on this lower level of reduced income for 14 months, and the bills were the same as before.” 

Though she had researched both bankruptcy and consumer proposals online, Angela wasn’t sure what to do next.  

“I didn’t understand really what the difference was, and I was scared to look into it because it was such a major step.”  

Understanding your options is the first step towards recovery 

When Angela and Rick eventually felt ready to reach out for help, they learned a lot more about the two federally regulated options available to them in Canada: bankruptcy and a consumer proposal.  

They also learned they were far from alone facing this kind of pressure.  

For instance, the Office of the Superintendent of Bankruptcy reports there’s been a significant increase in filings of bankruptcies and proposals across Canada in recent years, with consumer insolvencies rising 22.5% in 2024 compared with the previous year. 

More people are asking about regulated debt solutions, and their first conversations tend have elements in common, said Karen Adler, Director of Insolvency Administration at Bromwich+Smith. 

Adler said that an LITs approach to early discussions focuses on gathering details about a client’s financial situation, and debunking myths about how the two regulated debt solutions, bankruptcy and proposals, actually work.  

“We want to find out what caused the person to seek financial help,” Adler said. “What’s going on in their lives? What is their situation? How much money do they owe? Who do they owe it to? What kind of debt is it?” “I wouldn’t even suggest a solution until I had all the information,” she explained.  

“Once we have a sense of the person’s circumstances” Adler says, “the conversation can turn to the nitty gritty of whether bankruptcy or a consumer proposal is the right path forward.”  

The difference between bankruptcy and a consumer proposal

For many people, including Angela and Rick, learning the difference between a consumer proposal and bankruptcy is often one of the first steps.  

In a bankruptcy, Adler says, the message to the creditors is, “I can’t pay what I owe 

In exchange, and depending on the situation, the person may have to give up certain assets, make payments indexed to their income, and complete various duties over the period of their bankruptcy. Once those duties are met, and the required timeline is over, the person is released from bankruptcy and is debt-free. 

A consumer proposal works differently. In that case, Adler says, “the message is ‘I can pay you this much per month, and if you agree to my offer, and I make my payments as promised, you will write off the difference when I’m done.” Adler notes that a key part of this initial conversation is understanding that the “right” option isn’t about what creditors might prefer. It’s about which process gives an individual or a family the best chance of success and long-term financial stability.   

Adler explains that this is why she does not recommend a solution or quote payment amounts before finding out the person’s entire financial picture – their income, expenses, assets, debt types, family needs and more, to figure out what is sustainable for them.  

“If they’re using payday loans to meet their household expenses three months after filing a consumer proposal, that might be a sign that we missed the boat.”  

Understanding your options so you can take the first step on your debt recovery journey can shift everything.  

For Angela and Rick, it was the turning point they needed.  

Once they knew what a consumer proposal actually involved, the fear that held them back for years was replaced with a sense of control they hadn’t felt in a long time. 

Debunking common misconceptions about insolvency

According to Adler, one of the biggest misconceptions people bring into these initial conversations is the belief that insolvency is a personal failing.  

But financial strain that is caused by illness, job loss or any other reason is something anyone can experience. 

“The best way to deal with overwhelming debt is to consult a professional who is licensed to guide you through this process in the healthiest possible way.” 

Another concern that holds people back is how the process might affect their credit score.  

“Credit scores are not a measure of someone’s value as a person,” Adler said.  

While credit scores matter for lending decisions, they are not a reason to stay trapped in unmanageable debt.  

“You could pay that minimum payment for 10 years; you’d be no closer to paying it off, and you’d be 10 years older, but your credit score would be fantastic. If that is really the choice, what’s more important, your credit score or your life?” 

Debt recovery can change your life  

With a consumer proposal or bankruptcy in place, day-to-day life begins to shift in small but meaningful ways. The process you have embarked on doesn’t erase your obligations, but it does remove the constant uncertainty that made every decision before feel suffocating. 

For many people, the very first change is the sense of relief that comes with just one predictable payment.  

Adler sees this often.  

“When the calls finally stop, or their wages return to normal because the garnishment has ended, and they’re no longer relying on friends or juggling one credit card to pay another, people find themselves back in control of their lives.” 

Adler says that’s when people start to feel something they haven’t felt in months or even years: hope. 

A different relationship with financial planning, and often, each other

Support continues after filing, too.  

All consumer proposals and bankruptcies include two federally required counselling sessions, which are designed to help people build healthier financial habits over time. These give people a judgment-free space to understand their own spending patterns and make practical adjustments that fit their lives. 

For Angela and Rick, these changes began almost immediately.  

Without credit cards to fall back on, they had to work with the funds they had, which was something that brought more clarity than they expected.  

They began budgeting differently and talking openly about money in a new way.  

“It was very profound, because me and my husband had conversations about money and our relationship to money and our relationship with each other that we’d never had before,” said Angela. “The lid was lifted for us, and we were able to just be really open and honest with each other about a really sensitive subject.” 

Adler hears versions of this from many clients.  

Even though the debt recovery process requires commitment and financial responsibility, the emotional strain begins to ease. People stop feeling like they’re bracing for the next crisis and start feeling like they have some control again. 

Debt recovery doesn’t fix everything overnight. But for many people, starting the process marks the moment when fear begins to fade, and rebuilding begins to feel possible.