To the surprise of many, it is not a requirement for you to be in arrears on your debt payments to file an assignment in bankruptcy or a consumer proposal. It is also not necessary for your debt to have been sent to a collection agency.

Many people who file a bankruptcy are making their regular monthly payments on time and may have a decent credit rating. The problem arises when you have to re-borrow each month to cover your living expenses. Additionally, minimum payments may only cover interest charges and not reduce the actual principal debt owed.

So yes, an insolvent person can file for bankruptcy even if they are current on their debt payments. You are insolvent if you owe at least $1,000 and:

  1. You are unable to meet your obligations as they become due;
  2. You have ceased paying your current obligations in the ordinary course of business as they become due; or
  3. The value of all of your property is not sufficient to enable payment of all of your debt.

I would caution anyone from filing a bankruptcy for debt of less than $5,000, but everyone’s circumstances are personal. If wages are being garnished or your debt is at a very high interest rate, a bankruptcy might provide you relief.

At a free consultation, a Licensed Insolvency Trustee will review your financial situation in detail and review all available solutions with you. Don’t continue to struggle on a monthly basis; reach out today to get a fresh start.

Kathy LenartBy Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)