If you have debts that you are unable to pay, and you don’t receive wages, 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, if all of your income comes from social assistance, government pensions, or child support, you have no wages to garnishee. Credit card companies are not able to get a court order to allow them to garnishee social assistance payments, government pensions, or support payments; they are only able to garnishee wages.
Second, if you decide to go bankrupt to deal with your debts, you are required to pay the trustee’s costs to administer your bankruptcy. The minimum cost of a first bankruptcy is $200 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 people who do not have wages to garnishee, the correct option is to NOT go bankrupt until you return to work. There is a cost to bankruptcy, and you are protecting yourself from creditors that cannot, in most cases, garnishee your income.
If you have no assets and if you do not earn income from employment, 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, you may decide it’s worth it to pay the money to go bankrupt to stop collection calls. If you have family or friends that can help you with the payment it may also make sense for you to go bankrupt.
If you are considering bankruptcy as a way to deal with debt and still have questions, please contact us today.