young woman concerned about her debts and disability payments

The ODSP and Insolvency: How To Know If You Should File For Bankruptcy

Being in debt can cause a lot of uncertainty, especially if your only source of income is from a program like the Ontario Disability Support Program (ODSP).

Your situation may seem desperate, but you should know that declaring bankruptcy isn’t your only option. Here’s why.


What happens to unpaid debts?

It’s important to understand the difference between secured and unsecured debt. Secured debt, like a mortgage or a car loan, is backed by collateral. If you don’t pay your debt, the creditor can repossess the item.

Unsecured debt, on the other hand, isn’t backed by collateral. This includes credit card debt and some types of personal loans. If you don’t pay back the money borrowed, your creditors’ only option will be to sue you and try to obtain the right to garnish your wages.


What happens if you don’t earn wages?

Credit card companies and other creditors CANNOT get a court order to garnish assistance payments. This means that if you don’t receive wages and your income comes exclusively from an assistance program like the ODSP, your creditors won’t be able to collect your earnings.


What should you know about bankruptcy?

It’s important to understand that bankruptcy involves more than just clearing your debts. Any assets you own could be seized to pay back part of the amount owed unless they’re protected by provincial bankruptcy rules.

You should also know that there’s a cost associated with bankruptcy. You’ll still need to make monthly payments and you’ll lose any tax returns and sales tax credits you would otherwise receive. Any financial windfalls gained after filing will be collected to help pay your creditors back.


Should you file for bankruptcy?

If you have no assets and aren’t earning a wage, then there’s little your creditors can do to recover the money. It may be inadvisable to file for bankruptcy, especially if doing so will end up costing you more money.

However, this means you’ll likely need to deal with collection agency calls and other attempts by your creditors to recover their money. In addition, your credit score may be more damaged than if you simply file for bankruptcy.


Get Debt Help and Bankruptcy Advice in the Ottawa Region

Before you decide what to do about your debt, it’s best to discuss your situation with a professional. The licensed insolvency trustees at D. & A. MacLeod Company Ltd. can answer your questions and help you make a plan to regain your financial independence. Contact us today to make an appointment with an expert a location near you.