It is almost a certainty that everyone you know has debt, whether it is in the form of a mortgage, car loan, credit card, old cell phone bill or personal loans from a family member.  I’m confident that every one of those people would like to repay their debt – nobody borrows money with the intention of just filing bankruptcy to get rid of it.  Unfortunately, life happens and with a job loss, separation of marriage, unexpected health issues or caring for family, the ability to repay your debt falters.

The word “Bankruptcy” appears to be taboo to some people, and they will do anything to avoid seeing a Licensed Insolvency Trustee (LIT). However, seeking the professional advice of a LIT is your best option – they will review your financial situation in detail, explore solutions, explain processes and then YOU make the decision if you want to proceed with a formal insolvency filing.  The initial assessment is also free of charge.

Over the next couple of weeks, I will share scenarios of debtors that have come to see me and the options they were provided with to give you some comfort in making the phone call to seek professional help for your debt.

First, let’s talk about ‘Suzie’.

Suzie is currently in a debt management program with a not for profit credit counselling agency but recently lost her job and has no income to continue the payments.  She had been diligent about paying her car loan and currently has a vehicle that is worth $20,000 and only owes $4,000 against it.  She owes $12,000 on a couple of credit cards and a very high interest-bearing loan.  The options reviewed with Suzie were:

  1. Sell the vehicle and pay off all the debt and have some funds to live off until she can generate an alternate source of income
  2. Continue the debt management program by finding an alternate source of income as soon as possible
  3. A debt consolidation loan would not be viable at this time as she has no source of income
  4. A consumer proposal is not viable at this time as she has no source of income to offer the creditors
  5. File an assignment in bankruptcy and pay the Trustee $9,400 to keep the vehicle or let the trustee sell it.

Suzie decided that she would either sell the car or continue the debt management program as it didn’t make sense to her to pay $9,400 in a bankruptcy for $12,000 in debt.  Suzie felt better speaking to someone about her situation and relief knowing that she had some choices.

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)