I’ve Returned To Work. Is Now The Time To File Bankruptcy?

| Category: Bankruptcy in Ontario
Category: Bankruptcy in Ontario | (8) comments

bankruptcy timing 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.

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  1. Nina

    I recently returned to work after being unemployed and having no income at all for month. During that time my family helped me but I wasn’t able to make any kind of payment to my creditors. Now that I’m working I still can’t make payments because I need to buy clothes for work, get my car repaired, save up first and last months rent, etc. I am making about 2300 a month after taxes and repaying family members but I am not making any payments to the collection agencies. I am hoping that before I move I can also buy a few items of furniture because some of my things in storage have been damaged. I am just wondering if this is okay. I am delaying moving and bankruptcy until I have my 3 month review when I might get a raise. In the meantime will it harm my bankruptcy that I am not even attempting to pay the collection companies?

    1. J. Douglas Hoyes, Trustee

      Hi Nina. It does not impact your bankruptcy that you are in arrears at the time of bankruptcy. That’s actually a fairly common situation. I agree that it makes sense to get caught up on rent and other living expenses before incurring the cost of a bankruptcy. I would suggest that you contact a trustee now to plan the process, because you don’t want to leave it so long that the creditors attempt to start garnisheeing your wages.

  2. william smith

    Hi my name is William I filed for bankruptcy for the first time in 2003 but didn’t see it through . Being uninformed I proceeded to pay off my debt thinking that was all there was to it , so a few months ago I applied for financing for a new car only to be told there was an unresolved bankruptcy , I got the financing but now at a loss to what to do about my credit report

  3. Elisabeth H.

    hi my husband and I starting payment I filed bankrupty in Jun/2018 starting making payments in July 2018 in Ottawa we were waiting for a claim from WSIB for his injury since Jan 2018 today is Oct 25/2018 heard back from WSIB and my husband won his case how does that effect my bankrupty ? how much will thet take as this is back pay

    1. J. Douglas Hoyes, Trustee

      Hi Elisabeth. The answer will depend on the amount of WSIB he receives, and what medical expenses he is incurring. Each month he reports his income to his trustee (including WSIB), but he also reports any medical expenses he incurs for which he is not reimbursed; one offsets the other, so without knowing the two numbers it is impossible to do the surplus income calculation.

      I suggest, once you know the amount, your husband should book a meeting with his trustee and ask them to do the calculation and explain how it works.

  4. Mwemk

    I accumulated almost 60,000 debt from unsecured credit cards and line of credits. after separating from spouse, falling in depression and started online gambling. I don’t have a house, I live in a government subsidised house, I work part time getting about 550 biweekly at the same receiving Ontario Disability support of about 1700 Monthly since I live with a teen son.
    I have a 2012 van as an asset that I use. I have started to miss minimum payments. please advise If bankruptcy is an option for me.

    1. Ted Michalos, Bankruptcy Trustee

      Certainly bankruptcy is an option and based on the facts that you have provided, it may very well be the correct solution to your financial problems. I suggest you make an appointment to speak with a licenced insolvency trustee (LIT) to review all of your options and develop a plan to get you a fresh start… Sorry, that sounds like a commercial, but I mean it. Call a trustee and meet with them to discuss your situation in detail and by the end of the meeting you should have a plan of action to become debt free.


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