Everywhere you look there are reports on the record level of debt that Canadians are carrying.  Surprisingly, the number of insolvency filings has actually decreased substantially from ten years ago.  With low interest rates and low unemployment, some debtors are managing to continue to make their monthly payments and pay down their debt.  Many are not able to find a solution on their own, which is when they should seek the help of a Licensed Insolvency Trustee.  Here is story #3 of a debtor named “Mohammad.”

Mohammad owes $30,000 on credit cards.  He is retired, lives alone and works part time to supplement his pension income in order to enable him to meet his monthly living expenses.  Mohammad’s health issues resulted in some excessive spending.  He made large, impulsive purchases on his credit card, charged a couple of trips and took cash advances to gamble in the hopes of winning and being able to repay his debt.  Unfortunately, it became a vicious cycle of borrowing, spending and losing money at the casino.  Mohammad was at a low point in his life when he walked into our office – feeling ashamed of his actions and the amount that he owed.   I reviewed the following options with Mohammad:

  1. a debt consolidation loan would not be viable at this time as he has no assets to secure the loan and he has no ability to make loan payments;
  2. a debt management program would not be a viable option as he is unable to pay his debt in full over the next four years based on his pension and part time income. He is also uncertain as to how long he will be able to continue with the part time job based on his health.
  3. a consumer proposal is not viable at this time as his income is just sufficient to cover his basic living expense of rent, heat, food, etc.; or
  4. file a voluntary assignment in bankruptcy. Mohammad has no assets that the trustee would have to realize and his income is under the surplus income threshold so he would not be required to make surplus income payments.  He would be obligated to pay the minimum trustee’s fee which is approximately $1,800.00.

I explained to Mohammad that the creditors may take offence to the fact that he incurred large purchases on his credit card just prior to filing for bankruptcy and to the fact some of the debt was incurred to gamble.  He may have to attend a discharge hearing in Toronto at which the Registrar will decide if any conditions are imposed on him to be discharged from his debt.  I advised Mohammad that I would require him to self-exclude from the casino (voluntary ban himself from entering) and attend counselling sessions for gamblers.   The bankruptcy process is available to provide relief to a debtor but also to rehabilitate and thus I would want to ensure he addressed his gambling problem.

Mohammad decided he needed relief from collection telephone calls and decided to file for bankruptcy and was open to seeking help for gamblers.

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)