When you are living with a disability that limits your earning potential, managing your finances can be a challenging task. The situation may lead many to ponder, Can I File For Bankruptcy On Disability in Ontario? This comprehensive guide will provide answers to this and many more related questions.
The Nexus Between Debt and Disability
Life-changing events such as injuries, illness, or disability can exert significant financial strain on individuals. It is a harsh reality that health-related issues are among the leading causes of financial hardship in Canada. Not being able to work or having limited work ability can seriously hamper your income, leading to escalating debts.
Disability Insurance and Associated Challenges
Despite having disability insurance, individuals might find themselves in a financial quandary. This is because disability insurance often covers only a certain percentage of your lost income or for a specific period. As a result, individuals with mental or physical disabilities may face a reduction in income, making it difficult to manage their monthly expenses and potentially leading them to accrue debt.
Disability Assistance and the Debt Dilemma
For people living with a medical disability all their life, the scenario can be even more challenging. They often rely on modest disability payments provided by provincial and/or federal governments. But with the cost of living on the rise, these payments may not keep pace, leading to a reliance on debt to cover the shortfall.
The management of this debt depends on various factors, including your expenses, medical needs, and the ability to return to work. If you are able to manage a tight budget and your abilities improve quickly, you might be able to repay the debt swiftly. This could be achieved with the help of disability tax credits or income tax deductions and credits that make up a component of persons with disabilities (PWD) benefits in Ontario.
When Debt Becomes Unmanageable
Facing unmanageable debt can be a daunting experience. If the debt becomes more than you can repay, it might be time to explore your options.
Seeking Help from a Licensed Insolvency Trustee
One of the first steps you should take is to schedule a free consultation with a Licensed Insolvency Trustee, such as those at Bankruptcy Canada. They will consider your unique situation and all relevant factors, including any disability income, benefits, or support you receive.
Filing a Consumer Proposal on Disability
One of the options that may be discussed with you is a Consumer Proposal. A Consumer Proposal is an agreement where you retain ownership of your assets and income. Your debt is settled through the acceptance and payment of a proposal that you make to your creditors, through your Licensed Insolvency Trustee. The payments are designed to be an amount that you can afford, rather than a figure based on the amount of money that you owe and the interest rate of the debt.
Filing for Bankruptcy on Disability
Another option to deal with unmanageable debt is filing a Bankruptcy. This solution is suitable for those who require all or nearly all of their monthly income to live and do not have the ability to offer their creditors a regular monthly payment as a settlement.
Bankruptcy and Disability: How Does It Work?
In a Bankruptcy, there are sometimes assets that are sold by the Trustee to recoup money for the creditors. However, many assets are exempt from seizure under federal and provincial law.
For people with disabilities, Registered Disability Savings Plans (RDSPs) are exempt from seizure under the Bankruptcy and Insolvency Act, with the exception of contributions made in the 12 months prior to the bankruptcy being filed.
There is also an exemption for health and mobility aids, which means that you do not have to worry about losing your wheelchair, mobility scooter or other expensive assets that are reasonably necessary for your health or mobility if you have to file a bankruptcy.
The payments required during the course of the Bankruptcy are based on your income in comparison to the “Standards” established by the Canadian government. These Standards calculate the amount of income needed by families of various sizes. Most disability benefit payments fall within the exempt amount.
Conclusion: Seeking the Help You Need
Facing unmanageable debt can be overwhelming, more so when you are living with a disability. However, there are options available to help you navigate your financial challenges. Whether you choose to file a Consumer Proposal or a Bankruptcy, it is important to consult with a Licensed Insolvency Trustee to understand your unique situation and explore the best option for you.
If you find yourself asking, “Can I File For Bankruptcy On Disability in Ontario?”, it is time to reach out to a professional for a free, no-obligation initial consultation.
