Most Canadians think they have two choices when it comes to handling large debt loads – suffer endlessly or go bankrupt. It often comes as a surprise that there are numerous alternatives to get out of the debt quagmire. While all of these options will compel you to face up to your financial realities and will require action on your part, they can be far less onerous than outright bankruptcy.

With the recent recession still taking its toll, high consumer debt loads, low savings rates, and poor spending and credit habits, it is quite understandable that declaring bankruptcy sometimes seems like an attractive option. In some cases the stress and anxiety and financial restrictions are simply too much to handle and there is no other reasonable way out.

Every year in Canada about 100,000 individuals file for personal bankruptcy (or file a “consumer proposal”, one of the court-mandated alternatives to bankruptcy). Before you go this route, it’s a good idea to check out the following alternatives:

– Contact your Creditors Directly: Many creditors will be happy to discuss your debt problems and suggest solutions

– Debt Consolidation Loan: Talk to your bank about packaging all or most of your loans into one more manageable loan

– Personal Debt Management Program: Hire a money coach or take a course like Sheila’s Debt-Free Challenge to get you on back on track with your money

– Credit Counseling Agencies: Many “not-for-profit” agencies can help you re-negotiate your credit card loans and other debts, but you can generally expect to be charged fees. Not all creditors will cooperate with these agencies. Do your due diligence!

– Consolidation Order, also known as Orderly Payment of Debt: A court order that lets you pay off your debts over three years and frees you from creditor harassment and wage garnishment. (Available only in Alberta, Saskatchewan, PEI & Nova Scotia).

– Proposal(s): Under the Bankruptcy and Insolvency Act, a trustee or an administrator files a Proposal between you and your creditors to have you pay off only a portion of your debts or extend the repayment time

– Debtor’s Anonymous: A good resource for information & support

One of the main purposes of bankruptcy legislation is to “afford the opportunity to a person, who is hopelessly burdened with debt, to free himself of the debt and start fresh”. While having a new lease on life can sound appealing, bankruptcy also has serious consequences on both a financial and personal level. (More info on bankruptcy)

If you are feeling overwhelmed by your debt load, the first step is to figure out how much debt you have and whether you can realistically pay it off in a reasonable time frame. If you aren’t sure, then consult the resources above for some help – the sooner the better. – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-only financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.