Larry (not his real name) first came to see me about 5 months ago. He had accumulated about $50,000 in debt when he and his wife divorced. He doesn’t own a house and has a car that is worth a few thousand dollars.
He had been making the payments, however, he recently lost his job when his employer closed the doors. He used up his severance pay and is now getting EI. Larry was concerned about how to manage his debts and came to see if filing bankruptcy was a good option for him. For Larry, the answer was no. Yes, he had accounts in collection, but he was barely managing to meet his living expenses. He needed to focus his efforts at that time toward finding new employment.
The main reason people file for bankruptcy is to protect their income or to protect their assets. Since Larry had neither, filing bankruptcy was not as urgent as he initially thought it was.
A month ago, Larry came in to see me again. He has found a new job, albeit making 10% less that he was before. He wasn’t able to keep up his debt payments and now he is concerned about the accounts in collection. He tried to work out a payment plan with his creditors, but the amount he was offering wasn’t acceptable for the creditor. Larry was right to be concerned about his debt. A creditor had already started court action, and they would be able to get an order to garnishee his wages once they got to court. It would be better for Larry to stop that from happening.
We reviewed his situation and I let him know what a bankruptcy would cost. Larry has never filed for bankruptcy before and he is making more than the government guidelines allow, so I estimated Larry’s bankruptcy would cost him $200 per month for 21 months. A few days later Larry was back at the office signing his paperwork. We then sent notice to the creditor and the Court and the action against him stopped. He was able to breathe a sigh of relief knowing that his wages could not be garnisheed.
Does Larry’s story sound familiar? Job loss is common and it can be hard to cover necessary living expenses and file bankruptcy. Knowing when is the right time to file will make the process easier and help you to focus on one important goal at a time. If you’re wondering whether now is the right time to file for your unique situation, contact a Trustee in Bankruptcy for a free consultation. We can help you build a plan to get your finances back on track and take the stress out of dealing with your debt.