reasons to file bankruptcy

Most money problems are caused by events beyond our control. It’s a common misconception to think that people who are insolvent have spent their way into Bankruptcy. 

A job loss, illness, injury or marital breakdown can often be the last straw for someone in a precarious financial position.

In today’s podcast, Derek Chase talks about Bankruptcy and the people who file, from a Licensed Insolvency Trustee perspective. He discusses:

  • The demographics of who is filing
  • The most common factors that can lead to Bankruptcy
  • Surface reasons versus underlying causes of insolvency
  • How filing for Bankruptcy can free funds to carry on living 
  • The importance of credit counselling after being discharged
  • Reasons people avoid seeking help

If you are looking for stellar advice about how you can best manage your debt, a Licensed Insolvency Trustee can help. They are federally regulated and licensed by the Canadian government. You can rest assured that you will be treated fairly, without being judged.

Wayne Kay 00:04
Welcome to the Debt Matters podcast, where we help Canadians find solutions to their debt with Licensed Insolvency Trustees from across Canada. 

I’m Wayne Kay, and coming up in today’s show, we’re going to talk about the top reasons for declaring Bankruptcy. Are some reasons harder to deal with than others? What’s the difference between a surface reason and an underlying reason? How can you address some of these underlying factors? What if a person maybe isn’t telling the truth when it comes to money? And what is the top reason for not declaring Bankruptcy? 

My guest today, Derek Chase. From Derek Chase & Associates Licensed Insolvency Trustee serving Vancouver Island, Sunshine Coast and the North Coast of BC. Thanks for being here, Derek.

Derek Chase 00:52
Hi, Wayne. It’s a pleasure to be here today.

Wayne Kay 00:55
Great to have you here. We’re going to have a great discussion about declaring Bankruptcy. Looking at the economic forecasts for our country, I am assuming we’re going to see a lot more people in bad financial debts over the next couple of years. What do you feel?

Derek Chase 01:15
Yes, I would agree. The squeeze is on. Inflation is there every month. Interest rates keep creeping up, and it’s just squeezing people.

We see it every day now. So I think it’s important for people to know that they’re not alone when they’re having the feelings that they’re having right now and seeing their budgets just get squeezed more and more. It’s something that’s affecting everyone.

Wayne Kay 01:41
Are you starting to see more people calling the office?

Derek Chase 01:45
Absolutely. Yes. You can’t avoid it. It’s just no brainer to me. You can’t walk out of a grocery store without spending $60, it seems like. And it’s everywhere, and it’s not good. I think the Canadian population is groaning right now under the stress of what our system is at.

Wayne Kay 02:10
I was watching something and they were saying that even places like Walmart are seeing clients whose financial base is $100,000 plus for the first time. They’re seeing a lot of people are really stretching their dollars in all economic backgrounds.

Derek Chase 02:33
Yes, it’s just natural when you see that your dollar is not going as far as it used to, that you start to take action like that. So, yes, we are getting more calls, and it’s an easier fight to fight that monthly budget when you don’t have to pay out hundreds or thousands of dollars each month on your debt. So it’s a natural thing to do.

Wayne Kay 02:58
Well, I’d like to ask you, what are some of the top reasons that people declare Bankruptcy?

Derek Chase 03:04
Wayne, over the years, it’s been really quite interesting to see all the different reasons that affect people financially and literally. There’s a million different reasons, I’d say, for what can affect your finances. But the federal government tries to keep track of some of the main underlying causes of financial difficulty right across Canada.

There’s no particular order to these reasons, but some of the big ones that we’re told would include gambling. Another one would be substance abuse. And then you get into more personal type settings like health problems are a big one if all of a sudden you can’t work or you’re disabled. And certainly relationship changes are another big area where all of a sudden instead of one household, there’s two households. So double the cost on the household and half the income. 

Those are probably the four bigger areas that I can think of. Those four things and the problems that stem from them really create the debt that people can’t sustain.

Wayne Kay 04:16
Yeah, I remember years ago there was a bank manager who said probably the top reasons then were relationships and illness and sports – kids sports that a lot of parents got into trouble with. And now when you bring up the gambling and drugs and all this kinds of stuff, we’re seeing that more and more. So I’m surprised it’s actually marked down. 

Derek Chase 04:44
So we do see that as well. I wouldn’t put that as no, not as common as the others I’ve mentioned but for sure that is a factor that we’ve seen come up or dance or sports and the travel associated with those. 

But like I say, there’s no one top reason. It’s a variety of different reasons that can cause your world to all of a sudden have too much debt. And also the demographics as well.

It could be a 19, 20 year old or a 92 year old all throughout life. Things can happen that you just don’t expect.

Wayne Kay 05:23
Yeah, I’m glad you mentioned that as well. Are there some reasons that are harder to deal with than others?

Derek Chase 05:31
Yes, that’s a tough question. I guess there can be some really sad stories, especially on the medical side of things that are difficult and very emotional. 

And then there can be other situations that are quite confrontational, especially if it’s if there’s individuals involved as opposed to large corporations. Large corporations, they have a system, they understand, a certain amount of their loans will go bad and it’s very faceless in that sense for the most part. 

But if there’s individuals involved in a Bankruptcy filing, whether it could be a family member that’s loaned money to –  like the son in law and the father in law or something like that, those can get fairly intense. 

But I’d say more than three quarters of the time we’re dealing with income tax or the big banks or some other corporate loaner. Thankfully, the harder cases are the minority typically.

Wayne Kay 06:45
Now, what about when you start digging into the reasons? Sometimes I mean, some of them are very obvious. But do you have surface reasons or underlying reasons? What does that mean?

Derek Chase 06:58
Yes, that’s something that we try to identify and assist with in the financial counseling aspect of a Bankruptcy filing. There’s two mandatory financial counseling sessions where we try to help people become better at handling their money and dealing with debt in the future. And what we also try and discern in those sessions is what’s the real cause of their financial difficulty. 

For instance, someone can come in today and say, Derek, I’ve lost my job. I can’t pay my debts. I need to get protection for my debts. And that’s probably true, but is that a surface reason or is that the underlying reason for the situation?  Maybe that person lost their job because they’ve got some substance abuse that was causing them to either do their work poorly or miss coming together, miss the shift altogether. 

So if we can peel the onion a little bit and find out what the underlying reason is, and I mentioned it earlier, it could be gambling, it could be substance abuse, it could be a health problem. Finding that underlying reason is important because the whole process is designed to give the honest but unfortunate person a fresh start. And if you don’t want to boomerang around and be in debt in five years right back to the same spot, you want to try and identify this underlying situation and take further steps to address it. If you can accomplish that, then you’ve got a way higher chance of success for the future, for your finances. 

So it is important to ask the question – to say what is the cause of your financial difficulty? And is it that cause or is it something that’s, you know, a little deeper that’s causing you to be spending compulsively or to do something else? 

You know, it’s an interesting thing, and I think some people have really learned a lot about themselves. And if you can have the courage to address that underlying cause, then your whole life in front of you is going to be a little bit better.

Wayne Kay 09:16
I love that you mentioned that you’re looking ahead. You’re not looking at just getting them out of this one situation, but you don’t want them to be in this situation again. You said five years down the road, and it does happen sometimes where people get in trouble a couple of times or more. And so it’s nice to know that you’re looking out for the person for the long haul.

Derek Chase 09:42
That’s the goal for sure. And even during the course of a Bankruptcy filing, you’re really trying to start to help develop some disciplines or some habits that might carry forward into the future. 

If you can do that and maybe just learn from what’s happened in the past and develop some of these new disciplines, take the ideas that we think are good ideas about handling money and debt in the future and you put all that in place. Then chances of having success with your finances in the future are quite high, I think.

Wayne Kay 10:20
But you have to be honest, so you have to actually break down that barrier with people –  there’s a bit of psychology, I would imagine, on your end to see whether or not they’re actually telling the truth and how do you get them to be honest?

Derek Chase 10:37
Well, yes, that’s a good question. And you talk to people enough and for long enough, you learn how to communicate with them.

And I think what we have to be careful about though, is to recognize that our training is as a Chartered Accountant and as a Licensed Insolvency Trustee. We’re not really equipped to help a person with their gambling issue or with their – why are you spending compulsively like that? 

What we have is a long list of resources for people that are trained as counselors in those areas. And we provide that to people so that if one of those underlying causes is touching their life, or maybe it’s touching someone’s life that’s in their close circle that’s affecting them, then you can get that specialized counseling and deal with it. And so we just provide them with contacts there and just give them the encouragement to follow through and seek out that counseling.

Lots of times people have counseling embedded with their jobs if they’re in a union or in a big corporation and it’s free. So, I mean, it’s a good thing to take advantage of if that’s available and deal with the underlying factor once and for all.

Wayne Kay 12:01
Yes, as you said, it sets them up for life. I like the way you phrase that just by addressing these issues can literally change everything in their life. Let’s talk about the reasons for declaring Bankruptcy. By any chance, do they have a list of reasons not to declare Bankruptcy?

Derek Chase 12:24
Yes, certainly there’s obviously no need to declare Bankruptcy if you have assets and income sufficient to deal with your debts. But I think the reason why a person doesn’t declare Bankruptcy is really just that natural instinct to try and hang on. And you could also put pride in there. 

I think it’s important to recognize that this is federal law, so it’s available coast to coast. It’s something that parliament has said, hey, this is okay to do when you’re in a pickle to not declare Bankruptcy or not even know about it, or maybe not consider a Consumer Proposal.

I think you’re hurting yourself and it’s important to understand what the law of the land is and to see that there are these mechanisms that can free up cash flow every month so that you can better deal with the needs of your family. And if you don’t do it because you’ve got this too much pride or something else that’s not letting you even investigate it, then I think you’re really hurting your family.

To pay out $700 or $1,000 or $1,500 a month on high interest debt versus all the different things that you could be doing with those resources for your family. I think it’s just wise to know about Consumer Proposals and Bankruptcies.

Wayne Kay 14:11
One thing we should mention, we have to mention this, no judgments.

Derek Chase 14:16
No, oh gosh, no. It’s something that for sure I can speak of in our office. And I would be comfortable to say in all lit offices that we’re treating people the way we would want to be treated and we have empathy and encouragement. So, yes, life’s hard. You need to know the things that are there for you if you’re in that tough spot.

Wayne Kay 14:50
No, I think that’s just so important for people to realize because there’s so much fear and embarrassment and all these emotions that play into this. So it’s great when they reach out and they find this comforting person there who is truly there to help. That’s what you’re there for. Do you have some final words of advice for us regarding Bankruptcy?

Derek Chase 15:12
Yes, it’s just one tool in the financial toolbox to help your finances be a little bit better. It’s a very private process for the most part, and I would just suggest to people that you get all the information that you can before you make big decisions like this. And certainly don’t wait. Sooner the better for your finances and for your overall health.

Wayne Kay 15:37
Yes. Derek, that’s a great way to end this podcast. Thank you so much for your time, as always.

Derek Chase 15:43
My pleasure, Wayne. Have a great day.

Wayne Kay 15:46
My guest today, Derek Chase. You can learn more or schedule that free consultation with Derek Chase & Associates Licensed Insolvency Trustee by going to the website 

And that’s it for today’s Debt Matters podcast. Make sure you subscribe wherever you get your favorite podcast from. And of course, for more information, you can always check out Thanks for listening.

About Derek Chase

Derek Chase is a Licensed Insolvency Trustee in British Columbia. He has been helping individuals and corporations restructure their debt since 1997. His areas of practice include personal and corporate insolvency including Consumer Proposals and Bankruptcy. The best part of his work is to be able to witness lives change for the better when the heavy burden of unmanageable debt is lifted. 

Additional Resources