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

| Category: Bankruptcy in Ontario
Category: Bankruptcy in Ontario | (2) 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?

    Reply
    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.

      Reply

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