Getting Out of Debt: A Toronto Bankruptcy
Linda (not her real name) was 29 when she first came to David Sklar & Associates’ Toronto office – to see if she could get out of debt that had been following her for years.
In her early 20s, Linda had been careless with her finances – and had racked up substantial debts to a wide range of creditors including former landlords, credit card companies, banks, car loan companies, payday loan companies, phone companies, taxes, and more. These unpaid debts and her creditors followed her wherever she went.
By the time she was in her late twenties, her finances were chaos. Added to her financial distress, Linda’s common-law husband (who loved her and their child), was not convinced they could have a future together if she did not get her past debts under control. The collection calls, notices and legal actions were putting an unbearable strain on their relationship.
Although Linda had been able to get a job a few months after the birth of her son – the constant stream of collection calls she was getting at work, was putting her job in jeopardy.
Making A Needed Change
Realizing that she needed help, Linda decided to speak with David Sklar & Associates at their Toronto office.
At her initial meeting with Richard Sklar, Estate Administrator – Linda laid out her problems in detail. She owed $65,000 in unsecured debt to over 35 different creditors. She had $1,500 in bankruptcy-exempt personal effects and furniture; no secured loans; and a monthly net income of $1,600. Several of her creditors had already begun legal action, and there was a garnishee on her salary.
After exploring all of her options with Richard, Linda decided to file for bankruptcy.
Normally, in a bankruptcy, the income of the entire household is taken into account to calculate surplus income. However, as was his right, Linda’s common-law husband refused to disclose his income. This meant that Linda’s surplus income was calculated according to guidelines set down by the Office of the Superintendent of Bankruptcy for non-disclosure situations. It was determined that Linda would be required to pay $200/month into her bankruptcy estate for the 21 months she would be in bankruptcy.
In addition, during her bankruptcy, Linda would be required to submit monthly budgets and paystubs to her bankruptcy trustee and honour the terms of her bankruptcy.
Once the bankruptcy was filed, and her creditors were notified – all their legal actions were stopped. The collection calls and notices were stopped – and the garnishee was removed.
As Richard explained to her – during her mandatory Credit Counselling sessions, there will be a special focus on managing credit. This would be aimed at helping give her the tools she will need to move forward.
Successfully Completing Bankruptcy
Once Linda has successfully completed her bankruptcy, she will have gotten out of debt and earned a ‘fresh start’ to her financial life. In her youth, she did not understand the ramifications of her poor credit choices – now that she is maturing and raising a child – she is trying to correct the past and move forward with a better attitude towards debt and personal responsibility.
To protect our clients’ privacy, aspects of this case study have been altered