I don't want luxury but I would like to make ends meet.
December 22, 2010 9:47 AM   Subscribe

I can't make ends meet and am at the point of looking into bankruptcy. Please help me understand bankruptcy and if it would even work for me. Snowflake details inside.

I am self employed, sole proprietor, in Ontario and the sole income provider for a family of 6. What I have seen online has led me to believe that I can't be self employed and claim bankruptcy. However, I can't close my business as there would be no income to support my family. I have seen consumer proposals mentioned as an option but no details on if they would work either.

My income almost, but not quite, covers our (basic, not extravagant) needs, the (basic) costs of running my business, and minimum payments on our debts. By the time I file my taxes for 2010, I will owe approx. $15 000 for taxes and $6000 on student loans. I have $2200 in credit card debt plus $2500 on a joint cc in my partner's name. My partner has $5500 of additional cc debt. I have been making small payments regularly to keep everyone at bay but after 2 years of this I can't keep it up anymore.

Getting a second job is off the table and due to the nature of my business I cannot increase my income. My partner is not earning any income, which is a complicated and touchy subject so let's ignore their part in this for now.

My credit rating is shot, so I'm not worried about that short term, but one day I would like to buy a house. I have no assets and zero savings. What do I do?
posted by anonymous to Work & Money (17 answers total) 3 users marked this as a favorite
 
Getting a second job is off the table and due to the nature of my business I cannot increase my income. My partner is not earning any income, which is a complicated and touchy subject so let's ignore their part in this for now.

This is touchier than bankruptcy?

You need to sit down with your partner and come to some sort of understanding here.
posted by unixrat at 9:51 AM on December 22, 2010 [1 favorite]


The key term above is "partner" - in a true partnership, both parties should contribute. If your outgoings just exceed your income, then your partner will need to make up the difference, regardless of whether it's a "touchy subject" (as unixrat argues).
posted by gene_machine at 10:09 AM on December 22, 2010 [1 favorite]


Are your 4 kids in school yet? If your partner is staying home with little ones, is it possible to find a retired family member to come in and take over the childrearing for a while while your partner works?

Are you able to start looking for a better paying job and sell off the business?

Is your partner more employable/potentially better income than you and you could stay home and do the childrearing while s/he works?

Are you unable to take a second job because of the nature of the business (like it is an on-call type thing?) Are there second jobs that would be flexible?

Basically there are way too many variables for us to really help you with this. You're probably best helped by a financial planner.
posted by k8t at 10:10 AM on December 22, 2010


Looks like you owe just over $31,000. Can't you consolidate that into one loan/line of credit? On a 5 year loan, that's just over $600/month. Cancel some credit cards, and lower your limits on the rest.

Are you low income? Have you tried applying for government support?

As for bankruptcy in Canada, this website can help.
posted by blue_beetle at 10:26 AM on December 22, 2010


Mod note: comment removed - do not hector people about choices they have already made which are not unmakeable. If you think the comment makes you an asshole, do not make it in AskMe, period. MetaTalk is your option.
posted by jessamyn (staff) at 10:33 AM on December 22, 2010 [2 favorites]


Are taxes and student loans dismissable in Canada? With vanishingly few exceptions they are not dismissable in the USA. In that case you are looking at around $10,000, which for sure can seem like a big hole to dig your way out of, but isn't SO bad. Not a/your/Canadian lawyer.

But yeah, I agree that your partner needs to start pulling on the same end of the rope that you are.
posted by dirtdirt at 10:36 AM on December 22, 2010


Is it more feasible for your partner to declare bankruptcy? I can understand that, with 4 kids, it might make sense for one of you not to do paid work outside the home--child care costs are really high, after all--but if your partner's debts were out of the equation, the overall family debt burden might seem easier, and not have an impact on your business. (This is assuming that you're saying 'partner' here in reference to someone who is not your legal spouse or partner in civil union, and thus someone whose debts and yours are not legally commingled.)

It is often possible to negotiate a reduced rate of student loan repayment (temporarily), and to negotiate an installment plan for taxes. See an accountant and/or an attorney to discuss your options with those things; I have done both of these things in the US, but I am sure the process is different enough in Canada that my experience is not so relevant.

I would explore the student loan rate reduction/deferment and tax installment options before even considering bankruptcy for yourself. Bankruptcy for the partner, if your debts are not legally commingled, might make a reasonable amount of sense if he or she isn't likely to be back in the workforce anytime soon.
posted by Sidhedevil at 10:50 AM on December 22, 2010


With so many things off the table you are really boxing yourself in. From my perspective, it doesn't seem like your business is actually financially solvent - it might be on a month-to-month basis, but once you factor in taxes (yearly) and a living salary for yourself, you're in the red. Sit down and do out the math on a yearly scale. You're not going to want to hear this, but since you can't get a second job, you're going to need to start looking for a new first job and disassembling your business, and then evaluating whether or not you need to go through bankruptcy. How much is maintaining your pride by running an unprofitable business worth to you?
posted by fermezporte at 11:15 AM on December 22, 2010


Can't you consolidate that into one loan/line of credit?

the OP said his credit rating was shot so the likelihood of him obtaining a loan will be slim to non-existent.

OP, have you talked to your partner about the possibility of filing for bankruptcy? and if you have, was it still preferable to your partner that you file for bankruptcy rather than for your partner to find a job? because that's incredibly selfish, considering that your debt is relatively low and could be managed were your partner to get a job.

that said, you really need to talk to a bankruptcy attorney to discuss your options as well as get informed about what bankruptcy entails. im not sure about canada, but in the US, an initial consultation with an attorney is usually free of charge.
posted by violetk at 12:58 PM on December 22, 2010


"My income almost, but not quite, covers our (basic, not extravagant) needs, the (basic) costs of running my business, and minimum payments on our debts. By the time I file my taxes for 2010, I will owe approx. $15 000 for taxes and $6000 on student loans.

The bigger problem is that if your income doesn't give you enough to meet your bills and set money aside for taxes, it really doesn't meet your basic needs. Even if you could zero out all your current debts tomorrow, you need a change in your income to outgoings ratio to actually solve this problem.

Metafilter is filled with threads on ways to do this but if you are out earning while your partner manages the domestic front, you will need him or her to be on board with that to make it work. If your partner isn't willing to do that (get rid of one car, turn off cable, buy second hand clothing, grocery shop like a ninja) then its going to be really hard if not impossible.

My partner has $5500 of additional cc debt. I have been making small payments regularly to keep everyone at bay but after 2 years of this I can't keep it up anymore.

You are self-employed while your partner is technically unemployed. It may make a significant enough difference in your monthly outgoings for them to be the party to declare bankruptcy if anyone does. I think, however, you need to consult with an actual advisor here, be it financial or legal.
posted by DarlingBri at 1:35 PM on December 22, 2010


Folks, it may not be possible for the partner to get a job that will pay enough to make it worthwhile for them to pay someone else to care for however many of the four kids need childcare.

Y'all are acting like caring for four kids isn't work that needs to come from somewhere, and/or like being out of the workforce for $number of years caring for four kids makes one a great candidate for employment in a super-tough economy. Unemployment is really high right now, so the "tell the partner to find a job" and/or "close your business and find a job" answers aren't necessarily helpful short-term solutions.
posted by Sidhedevil at 1:36 PM on December 22, 2010


Sidhedevil, I'm a father myself, so I understand the problems of childcare, but the particular phrasing of "My partner is not earning any income, which is a complicated and touchy subject" implies that there is something going on above and beyond your straightforward interpretation.
posted by gene_machine at 1:48 PM on December 22, 2010 [1 favorite]


gene_machine: ""My partner is not earning any income, which is a complicated and touchy subject" implies that there is something going on above and beyond your straightforward interpretation."

Yes, but none of us know what that is. The hand we were given to play with in this question is: one income family, expenses exceed income. Those are the parameters. The question of whether this should be a one income family isn't on the table.
posted by DarlingBri at 1:52 PM on December 22, 2010 [2 favorites]


Is your partner suffering from any kind of illness that prevents them from working (including mental)? Something like ODSP or CPP disability benefits can be a real help. What about one of you going back to school and get loans to help with living expenses? Are you able to defer your student loan payments? (LICO is around $57,000 for your family - are you over that)? You are getting all the applicable child benefit cheques, right? Can you sell your business for any money?

If you stop paying your partners two CC's that should free up some income on a temporary basis - hopefully you can use that towards what you owe Revenue Canada so they won't garnish your bank account for the back taxes. The downside is that your partner will have their credit score trashed and be hounded by the two companies, however that may motivate them to find a solution such as employment or a family loan to help with expenses. Most of the poeple I know in your shoes (young children, struggling with expenses) get help from family members either through babysitting or cash or co-signing loans. Can anyone on either side step up?

Do you see your situation changing at all in the next few years? Will your business ever make more money, can you ever work a second job, can your partner ever work, will the children not need as intensive child-minding? If those things are not going to change then no, you can't continue like this and you both need to sit down with a financial planner that can show you what your expected expenses should be and give you an income for both partners to aim for (either both of you working or one partner working two jobs with a lot of support from the other)

You sound overwhlmed. Sometimes these problems can be solved by time (such as the children growing less needy, eventually paying off debts), sometimes you have to reach out for the help. I wouldn't worry about buying a home, if your income supports a mortgage you can qualify, just not at the best rates. That sounds like a few years off so don't borrow trouble and focus on the immediate crisis.

Good luck to you.
posted by saucysault at 3:59 PM on December 22, 2010


It's a UK centric website, but you will no doubt find the forums over at MoneySavingExpert of use. There are a lot of stories from people in the same boat as you, and how they managed to cope with it. I just wish I knew of a Canadian equivalent.
posted by dougrayrankin at 4:36 PM on December 22, 2010 [1 favorite]


It doesn't sound like bankruptcy is going to fix your actual problem. Your actual problem is that your business is in the red (if you can pay your basic expenses with money from the buisness yet have to pay $15,000 in taxes at the end of the year that means your business is seriously upside down) and you don't earn enough to support six people. There is no shame in that situation but it does show that you will need to make major changes to get everything squared away. Your partner absolutely should contribute actual cash by way of whatever kind of job they can get (maybe you work days and they work evenings so you can both cover child care). At the very least your partner (and you!) should not run up credit card debt. Even though you don't want to do it, you might need to find a regular job and give up the business. In addition, sell off stuff you don't need, stop shopping all together except for actual necessities, apply for food stamps if you qualify, cut ALL possible expenses (ie: cable is not a necessity), etc. I don't understand why you can't increase your income. The name of the game for getting out of debt is either decreasing your expenses or increasing your income and you can only decrease expenses so much.
Most importantly...listen online to Dave Ramsey. Whatever you choose to do, you are going to have to make some significant changes to your lifestyle whether you (and the partner) like it or not.
posted by MsKim at 5:46 PM on December 22, 2010


Don't know about Canada but there are free consultations with lawyers in the US. I wrote all of my questions down on paper before going and most were answered ... a few 'I don't knows' and others were 'I have seen several different outcomes like ..'. There was no obligation or pressure to sign on right away and I just left with my questions answered to think about it more.

Maybe that is what you should do.
posted by CodeMonkey at 10:34 AM on December 23, 2010


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