What to expect when filing for Insolvency in Ontario in your 40s?

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In your 40s, you should build assets to help you transition into retirement. It can therefore be very frustrating when you find yourself with many debts to repay at this stage, unlike if you were in your 20s. And it is unlikely that you would be able to build wealth for your retirement if you have high-interest consumer debt at this stage of your life, as you will be struggling to service your debts as well as take care of your daily expenses. If you are insolvent, you have the option to file for insolvency in Ontario. This means that you are unable to repay your debts as they come due. 

This article explains how having a lot of debt in your 40’s impacts your life and how filing for consumer proposals and insolvency can get you through the struggles.


  1. What level of debt is dangerous at 40s?
  2. How do you file insolvency to gain debt relief in your 40s?
    1. Filing bankruptcy relief
    2. Filing consumer proposal
  3. Does filing insolvency affect your ability to own a home?

What level of debt is dangerous at 40’s?

Debtors in their 40s are filing insolvency in Ontario to relieve themselves from burdensome debts. On average, they file for relief from consumer debts amounting to more than $64,700, excluding their mortgage home. 

Your debt can be a problem even if it is not that high. The following are some important indicators that show your debt is excess, and you need a licensed insolvency trustee to guide you through your debt help options.

  • When you are not able to pay your bills on time
  • When your debt is on the rise from credit cards, payday loans or cash advances
  • When you can pay more than the minimum balances on your credit card
  • When you are receiving a collection letter from debt collection agencies

Carrying such excessive debts is bad for you because it keeps you from:

  • saving money for a home
  • paying down your mortgage
  • putting money aside for your retirement

How do you file insolvency to gain debt relief in your 40s?

When carrying excessive debt, you are under so much pressure to manage your everyday living costs and raise a family. You may want to own a home or just keep the one you have, yet you are living paycheck to paycheck and literally using debt to survive. 

Taking credit to survive does not offer you a long-term solution. It only can grow worse as you get to your 50’s and 60’s. The only options you have for a fresh start are filing a bankruptcy relief or a consumer proposal.

Here is the list of debts people between the ages of 40-49 use bankruptcy or consumer proposals to gain relief from:

  • $17,800 in credit cards
  • $20,000 in bank loans, installment loans, credit cards and overdrafts
  • 2 out of 4 people of this age get relief from $7,400 in payday loan debt
  • High-interest installment loans of 39%-59% interest
  • 15% of these people typically get relief of $15,100 in student debt
  • One-third of these people wipe out an average of $19,900 in tax debts.

Filing bankruptcy relief

The amount of money you earn and whether or not you have filed for bankruptcy before determines how long your bankruptcy lasts.

For example:

  • If this is your first time filing for bankruptcy and you have no surplus income, the process will take nine months to complete.
  • If you have filed for bankruptcy for the first time and you are earning more than the government income threshold, your bankruptcy will last 21 months.

For an average person in their 40s filing bankruptcy, the monthly after-tax income is just over $2,900 for a family of two. Such a person’s bankruptcy will last 21 months as they will be required to pay an additional $80 into his bankruptcy each month. Depending on your circumstances, this may exclude your allowable expenses. It is, therefore, crucial that you involve your trustee in reviewing your income and expenses so as to determine the cost of bankruptcy under your unique circumstances.  

Your bankruptcy impacts your credit score. For example, even though you can get a secured credit card while bankrupt, your access to new credit will be limited during your bankruptcy. You can take steps to rebuild your credit score later after your bankruptcy proceeding is complete. As time goes by, the impact of your bankruptcy on your credit score declines and is completely removed seven years after your discharge. 

Because most people in their 40s earn enough to trigger surplus income payments that can result in high monthly payments, they opt to file a consumer proposal to avoid paying more in bankruptcy. Research shows that 4 out of 5 people with debt in their 40’s prefer consumer proposal to bankruptcy.  

Filing consumer proposal

A consumer proposal is a debt payment arrangement where creditors accept just a portion of what you owe them and forego the rest. 

Consumer proposal payments are determined by:

  • The amount your creditors are willing to accept
  • How soon do you wish to pay the settlement 

Creditors look forward to receiving what they would get when you file for bankruptcy. Therefore, the more money you make, the more consumer proposal payments you will be expected to make. Your creditors will also expect you to pay more if you have assets like equity in your home. 

On average, most people finish paying their consumer proposal in 42 months, even though the maximum allowable period is 60 months. While you can negotiate your monthly payment based on this maximum period, you have the freedom to pay off sooner if you want to. 

Your consumer proposal will be taken off your credit report either three years from the date of completion or six years from the day you filed, depending on which occurs first.

Does filing insolvency in Ontario affect your ability to own a home?

Only 6% of the people who filed for insolvency in 2020 owned homes at the time of filing. The rest only wished they could. Owning a home can be difficult if you have excess credit card debt and other debts because it simply means you cannot pay your mortgage. An excessive amount of credit card debt and other unsecured debt prevents you from saving for a down payment. This makes your debt-to-income ratio too high for any mortgage lender to accept the risk. 

A consumer proposal will not impact your existing mortgage if you are a homeowner who keeps mortgage payments current. Most homeowners will file a consumer proposal to wipe off unsecured debts and also to keep home assets like home equity. 

You can only qualify for mortgage two years after completion of your insolvency if:

  • You have established two or more new credit facilities of $2,500 each
  • you meet any other income and down payment qualifications

Filing a bankruptcy or consumer proposal will not make sense for every financial situation. You can, however, discuss your debt situation with a Licensed Insolvency Trustee to get guidance on which option will work for you. 

How to find a trustee in Ontario?

If you are reading this article, chances are that you may be feeling overwhelmed by your current debt situation. You are not alone. Many people in Ontario struggle with unmanageable levels of debt. The good news is that there is help available. Dana MacRae is a licensed trustee providing insolvency services in Ontario. When you contact our team, we will review your unique financial situation and help you determine if insolvency is the right solution for you. We understand that this can be a difficult and stressful time for you, and we will do everything we can to help you make the best decision for your financial future. Contact us today for debt help!

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