How to Decide if Bankruptcy is Your Best Option to Debt Problems

Q: I have an employee who has been very stressed at work lately. I spoke with her in private about this and she told me she hasn’t been sleeping much lately as she has a lot of debt and is getting collection calls from her creditors. She thinks that bankruptcy is her only option. I told her I would do some research and get back to her. Is she right, is bankruptcy her only option?

A: Your employee is experiencing some very common signs of being in financial difficulty. During times of financial crisis, people are often not able to view their options objectively. The added stress of looking for the best solution to their troubles might be too much and they make choices based on how they feel. Bankruptcy may or may not be a viable option, but it's important to consider all options carefully.

How to Ease the Pressure when Considering Bankruptcy

Before your employee makes any decisions regarding her finances she needs to get relief from the collection calls she is receiving. The most effective way to do this is for her to contact the creditors and be upfront with them regarding her current situation. She should also ask them for a little time (1 – 2 weeks) to determine the best way to resolve her financial difficulties. While it can be intimidating to speak with creditors when you are behind on your payments, it’s better to call them instead of being afraid to answer your phone.

Who to Call First when Thinking about Bankruptcy

Once this is done, I would encourage your employee to contact a licensed and accredited credit counselling agency. She should also contact the Better Business Bureau to make sure the agency she contacts is well established and has an excellent service record.

Alternatives to Bankruptcy

A well trained Credit Counsellor will carefully review her complete financial picture; household income, assets, outstanding debts, monthly expenses as well as any non-financial factors that are impacting her situation. With this information the Credit Counsellor will be able to outline different solutions for your employee and alternatives to bankruptcy.

These solutions could include but are not limited to conventional financing, consolidation options, help from family and friends, liquidating assets to pay off debt, establishing a debt repayment program, settling the debt, or looking at a legal process like a Consumer Proposal or bankruptcy. It will also matter if she has joint debts or not.

The Credit Counsellor will also go over the pros and cons of each option so that your employee has the right information and understanding to make a more informed decision. Once your employee has made a decision and moves into action, her level of stress about her finances should diminish considerably which will positively impact her work.

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