Being ensnared by debts can create a realm of uncertainty, especially when the only income source is a program like the Ontario Disability Support Program (ODSP). Although your situation might seem dire, declaring bankruptcy isn’t your only pathway. Let’s delve into why that is the case.
Understanding Unpaid Debts
To comprehend the effects of unpaid debts, one needs to distinguish between secured and unsecured debt.
Secured debt, such as a mortgage or car loan, is underpinned by collateral. Failure to pay this debt allows the creditor to reclaim the collateral.
On the other hand, unsecured debt is not backed by collateral and includes aspects like credit card debts and certain personal loans. Non-payment of these debts could result in a lawsuit from your creditors, seeking the right to garnish your wages.
What If You Don’t Earn Wages?
Interestingly, creditors, including credit card companies, cannot obtain a legal order to garnish assistance payments. This implies that if your income solely comes from an assistance program like the ODSP, your creditors won’t be able to seize your earnings.
Bankruptcy: What You Should Know
Bankruptcy is more than just a debt clearance process. Any owned assets could be confiscated to repay part of the debt, unless they are protected by provincial bankruptcy regulations.
Moreover, bankruptcy does not come free. You’ll have to continue making monthly payments and you will forfeit any tax returns and sales tax credits that you would otherwise receive. Any financial windfalls gained after filing will be collected to help pay back your creditors.
Should You File For Bankruptcy?
If you possess no assets and don’t earn a wage, then your creditors have limited means to recoup their money. In such a scenario, filing for bankruptcy might not be the most prudent option, particularly if it ends up costing you more.
However, this also means you’ll probably have to deal with collection agencies and other attempts by your creditors to recover their money. Plus, your credit score might take a bigger hit than if you simply filed for bankruptcy.
Seeking Debt Help & Bankruptcy Advice
Before making a decision about your debt, it’s best to seek advice from a professional. Licensed Insolvency Trustees, like those at Bankruptcy Canada can provide answers to your queries and assist you in crafting a plan to regain your financial independence.
Here is an ordered list of steps to take in dealing with debt:
- Understand your debt (secured vs unsecured);
- Evaluate your income sources;
- Understand the implications of bankruptcy;
- Evaluate if bankruptcy is the right route;
- Seek professional advice.
Contact us today to schedule an appointment with an expert at a location near you.
