What are My Options if I Earn Minimal Income?

What are my Options if I earn minimal income?

If you have debts that you are unable to pay, and you don’t have high income, here’s what you need to know:

First, if you don’t pay your credit cards or other unsecured debts, your creditors can take you to court, sue you, and attempt to garnishee your wages. However, in Ontario the typical garnishment granted by the court is 20% of your wages. Therefore, if you earn $500 per month, a typical garnishment may be $100 per month.

Second, if you decide to go bankrupt to deal with your debts, all garnishments will stop. However, you are required to pay the trustee’s costs to administer your bankruptcy. The minimum cost of a first bankruptcy is $160 per month for nine months. While bankrupt you will also lose your tax refunds and GST credits, which increases the cost of your bankruptcy.

Therefore, for many low income earners, the correct option may be to NOT go bankrupt until your income increases. Bankruptcy is expensive, and so in many cases it does not make sense to pay $160 per month to prevent a $100 per month garnishment.

If your income is low, our advice is as follows:

First, to protect yourself it is often wise to open a new bank account at a new bank. If you have a Visa card at XYZ Bank and you don’t pay them, it is easy for XYZ Bank to go into your bank account at XYZ Bank and get their payment. That’s why you want to bank at a bank where you don’t owe any money.
Second, bankruptcy may still be an option for you. If the stress of the phone calls is more than you can handle, and if you do want to prevent a future garnishment, you may decide it’s worth it to pay the money to go bankrupt. If you have family or friends that can help you with the payment it may also make sense for you to go bankrupt.

Bankruptcy may not be your best option at this time. However, if you have questions about bankruptcy, please contact us today.