Question: Due failed corp. business we owe more than we are worth personally. The corporation and its bank accounts are closed. The house has 3 mortgages and the house is worth less than the morgage value. Personally we are living on disability income (CPP and a former employee medical plan.) When we went to a trustee we found that we had a short fall of $600.00 per month hence eliminating a proposal or bankruptcy as there is no money left. If we walked away from the house we are no better off. The only bills being paid are the morgages and a car loan which has no equity. We have changed banks and withdraw the money as it comes in and redeposit it to cover debts. We want to know if we are protected and is there any possible way to resolve this issue. I have already had a failed business and went bankrupt once. We are 60 yrs old and in 5 yrs we will be on old age pension. Will our pensions be protected as they would be lower than the individual monthly allowance?
Answer: The trustee you met with has identified the correct issue: your most significant problem is that your monthly expenses are larger than your monthly income. Your first project is to eliminate that deficit. The two obvious solutions would be to give up the house, and perhaps the car.
If your house has three mortgages you are paying a lot to live in the house. Since the house is worth less than what is owing on the mortgages, there is no point in fighting to keep the house; it has no financial value. The logical option is therefore to surrender the house to the mortgage holder, and find a place to rent. That should eliminate your monthly deficit.
You are correct that a consumer proposal is not a viable solution, since you don’t have the income to support the monthly payments. A bankruptcy is a possibility, but because it would be your second bankruptcy, it would be more expensive, and last longer than a first bankruptcy.
Your final option is to do nothing. You have already opened a new bank account at a new bank; that’s good, because your old creditors are not aware of the new account. Banks and credit card companies are generally unable to get a garnishment order against government pensions, so that income is probably safe. You could therefore live off of your pensions, and not deal with the debts.
If you return to work a proposal or bankruptcy may be necessary in the future. Your trustee can provide you with more detailed information.