Question: OK here goes. I currently have about 40K of student loan debt from about 9 years ago. I also have about 22K in credit card debt and about 5000 in personal loans. I make about 1600 a month after deductions. My wife on the other hand makes 3200 after deductions. I want to go bankrupt because I know It will take me the rest of my life to pay these debts.
Now if i file for bankruptcy I have figured that because of her income we would pay about 450 a month for 9 months (although some are saying as much as 21 months is this true?) She also has student loans on which she pays 400 monthly another loan at 328 monthly(at 29percent interest) our rent is 600 monthly, our bills including groceries gas car insurance etc about 1200 more for a total of about 2500 dollars a month. We have no children and no assets.
Her credit score was ruined by the bank failing to make her payments in error regarding the student loans (long story trust me) so we are unable to get any type of credit. With both our scores hovering in the 650 mark. She also has credit card debt of around 15K and her student loans still total about 30K. Do they take into account her hardships as well when I file for bankruptcy or do the just look at her income numbers? 450 over 21 months is an awful lot of money for us when we can barely get by in the first place. Our combined debt load exceeds 100K (without a car loan or mortgage) She doesn’t want to file for bankruptcy because then neither of us would be able to get a reasonable mortgage until we would be in our mid to late forties. Any ideas or suggestions?
Answer: There are many options.
First, you are correct, you alone could file personal bankruptcy. You are correct in assuming that the higher your family income, the more you will have to pay while bankrupt, and yes, it is possible that your bankruptcy could last for 21 months, although yes, the trustee and the bankruptcy court will take into account your family situation.
Second, both you and your wife could go bankrupt. The advantage is that then all of your debts are discharged (assuming her student loans are more than seven years old), so you both get a fresh start. However, you are correct that again if you are both bankrupt, you will both be making surplus income payments for up to 21 months.
A third option would be to file a consumer proposal. In a consumer proposal you make a deal with all of your creditors and avoid bankruptcy. As a simple example, if you estimate that a bankruptcy would cost you $450 per month for 21 months, or $9,450, you could file a consumer proposal where you pay $200 per month for 60 months, or $12,000. Because the creditors will receive their share of $12,000 in a proposal, as compared to $9,450 in a bankruptcy, they may be willing to accept the proposal. The proposal may work for you because even though it lasts longer and costs more than a bankruptcy, you are only paying $200 per month, which is more affordable. Please note that this is just an example; actual amounts may be different.
You are worried about the impact on your credit report, which is a concern, but as you stated above you cannot borrow any money now anyway, so the damage to your credit report is probably less important than actually dealing with your debts.
In summary, there are a number of possible solutions, so we strongly suggest you contact an Ontario bankruptcy trustee to arrange a no charge initial consultation to review your options and determine which strategy will work best for you and your spouse.