When the COVID-19 pandemic shut down Ontario’s economy in March, 2020, no one could have predicted the extent of job losses and business closures. Many Canadians, who were already struggling with significant levels of debt, found themselves unable to pay even their basic living expenses. 

The government stepped up and provided benefits in the CERB and CRB to supplement a loss of income, and creditors deferred payments and stopped collection proceedings. Unfortunately, neither of these incentives reduces the amount of debt that is owed. A few options to deal with your debt after a loss of income are:

  1. Increase your income from other sources. Part-time employment or a small business venture (shovelling snow, dog walking, etc.) can provide additional funds to make debt payments.
  2. Decrease your expenses. Take a look at your budget and see what expenses can be reduced to enable you to re-allocate funds to debt payments. Contact your cell phone and internet provider to see if services can be reduced or put your gym membership on hold to reduce these expenses.  
  3. Talk to your bank manager to see if you can obtain a consolidation loan so you can pay off your current debt and be left with one monthly payment at a significantly lower interest rate.
  4. If you own your home, talk to your bank to see if you can refinance your mortgage to pay off your current debt. A mortgage payment amortized over a twenty-year period at a significantly lower interest rate is more manageable than a 29% interest-bearing credit card. 
  5. Contact a local not for profit credit counselling agency to discuss a debt management program. They negotiate with your creditors to accept payments, usually over a four-year time period, and can sometimes reduce the interest charges.
  6. Contact a Licensed Insolvency Trustee to discuss filing a consumer proposal or bankruptcy. An insolvent debtor can offer a compromise to their creditors by filing a consumer proposal, payable over a maximum five-year time period. A bankruptcy can be filed that will result in the elimination of most debt, but the trustee must realize on any value in your non-exempt assets and you may have to make surplus income payments.    

A free, initial assessment can be booked with a Taylor Leibow Inc. Licensed Insolvency Trustee to review your financial situation in detail and explore which of the above options is best for you to find a permanent solution to deal with your debt. 

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)