Since the pandemic was declared hundreds of thousands of British Columbians have lost their jobs and find themselves unable to make rent, mortgage, or credit card payments. Fortunately, our Canadian Government has stepped up and assisted financially (I will not get into whether that assistance was sufficient). Bank’s have offered deferred payments and lower interest rates subject to qualifications. People know this has only pushed their payment obligations down the line and in 6 months time their debt will have grown, and their debt payments will be higher. But today they have been granted some relief.
I recently read an article in the Financial Post that 4.2 million Canadians will eventually have to declare bankruptcy because of this pandemic. This could be from using credit to supplement their income during the shutdown, or while already having a high debt load, not being able to make payments now or after the deferral period is over.
The question is, if you are considering declaring bankruptcy or filing a consumer proposal, what is the timing of the filing. There are several factors to consider for each– which legal alternative does one choose to deal with their financial difficulties. Some of the factors to consider are:
- How long will one be out of work, or have a greatly reduced salary?
- What are one’s income prospects in 2-3 or 7-8 months?
- Has one been previously bankrupt?
- What is the total amount of the debt now?
- What are one’s exempt and non-exempt assets?
- Will one be or could one be inheriting funds should something happen to one’s family?
Please remember the above list is not exhaustive, everyone’s situation is different both now and the expected future.
Ultimately if one must file, the advantage is the ultimate cost, being monthly payments you must make during a bankruptcy (see Surplus Income requirements) or equity in an asset you would lose or have to repurchase, or the monthly payment required under a consumer proposal. Today, with one’s income presumably lower than prior to the pandemic the monthly payment would be lower, however, if one has a house, the reduction in value of a house 6 months from now may ultimately lead to lower payments in a bankruptcy or a consumer proposal.
There are several factors to consider, it is best that you discuss with a Licensed Insolvency Trustee how these factors will affect you. Just because you reach out today doesn’t mean the timing of a filing is best in 6 months. However, reaching out 6 months from now to only discover it would have been substantially less expensive for you to file today will compound your financial recovery.
D. Thode & Associates Inc, has Licensed Insolvency Trustees available to review your situation, answer your questions, help you come up with a plan of attack to deal with your creditors. Contact us today for a free consultation.