$200 away from insolvency

Tom Locke - Insolvency Trustee in London, Ontario
April 22, 2022

The report has been around for so long that its time, for whoever commissioned it, to look for a new consultant. For over a decade the story that “Canadians are $200 away from insolvency” has been popping up in newspapers and corporate reports. The reality is if that were the case we would be overwhelmed with new applications for insolvencies – but we aren’t.

If you are $200 away from insolvency we would like to meet with you to discuss your options – just call the office at 519-646-2222 we can set up a time to get together to review your situation.

You can be insolvent and not be bankrupt – being insolvent simply means that you cannot afford to pay your debts as they become due. Being bankrupt means that the person (or company) has formally taken the steps necessary to make an assignment into bankruptcy.

Canadians are very resourceful when it comes to paying their bills. Credit is frequently used to pay for credit and ironically creditors don’t mind a bit, as long as they are being paid. If you have used a line of credit or a credit card to make a payment on another form of credit you are insolvent, you are not “$200 away from insolvency” and you are not “nearly insolvent”.

No one (that I know of, after 27 years of working in the insolvency field) has ever planned to file for bankruptcy. The planning comes after insolvency has been acknowledged, and often on the way to the LIT’s office to formalize the bankruptcy. Planning for bankruptcy is a prudent thing to do – with a properly planned business venture the entrepeneur has nothing to lose when the creditors come calling.

There are many reasonable (and legal) steps that can be taken to protect assets some are quite simple and can be easily implemented. For example, if you transfer your interest in your home to your spouse prior to going into business, and prior to accumulating debt, your house becomes creditor proof.

Money deposited to RSPs are exempt from seizure, except a clawback for contributions made in the preceding 12 months. Similarly insurance funds are exempt from seizure when a specific class of family member is the beneficiary of the policy. Money held in a non-revokable trust is exempt from seizure.

Learn more call today 519-646-2222