Question: My gross income annually is $70,000 and my wife’s is $42,000. We own a home valued at $490,000 with an outstanding mortgage of $460,000. We have $110,000 of unsecured credit, a secured car loan for $15,000, and a second leased vehicle. In addition to this we are behind $7,000 in property taxes. Is personal bankruptcy in Canada our only option?
Bankruptcy Costly With High Income
No, bankruptcy is not your only option. In fact, it is probably not the correct option. Before considering bankruptcy, you should consider two other alternatives.
First, you could consider selling your house and renting. Your house mortgage is almost 95% of the value of your home. At this ratio you are likely paying a very high interest rate on your mortgage. Added to that you are behind on property taxes. By selling your house you might generate a small amount of cash, but you would probably also significantly lower your monthly living expenses. Paying rent is probably much less expensive than paying a mortgage and property taxes and repairs and maintenance on a $460,000 mortgage.
A house is not an investment, so reducing your living expenses may be a good start.
Whether or not you decide to keep your house, bankruptcy would be very expensive for you. The cost of bankruptcy is based on your surplus income each month. Given your income, filing bankruptcy would be very expensive.
A better option in your situation would be a consumer proposal. With a consumer proposal you can work out a payment plan that is affordable, without the significant monthly costs of a bankruptcy.
Calculating the full cost of a bankruptcy to determine whether or not it is the right solution is what a professional trustee in bankruptcy does every day. If you are considering bankruptcy, or a consumer proposal, let our bankruptcy trustees help you determine the cost of each option, so you can choose the right solution for you.