Thousands of mortgages come up for renewal every year in Canada. By March 2025, 31%…
Wondering how to know if you are insolvent? Here are a few clues:
- You’ve used cash advances to pay bills.
- You’ve visited the payday loan store.
- You’ve been hit with over limit charges on your card.
- You’ve had your credit card declined or, even worse, cancelled.
- You have no idea how much you owe.
- You’ve borrowed from a friend or relative.
- You’re afraid to answer your phone or open your mail.
None of these are good signs. But, what if these signs don’t apply to you?
You always pay your bills on time. You even have a decent credit rating.
Yet, you’re worried and wondering if you have too many bills. Your budget just seems too tight.
Okay. So, here’s how to determine if you are insolvent.
First, we’ll look at your assets. You’re going to add the fair market value of everything you’ve got.
Fair market is what you could sell it for…NOT what you bought it for.
This includes your house, your property, car, boat, bank accounts, retirement savings…
Everything at your disposal if you had to liquidate your belongings.
Then add up all your debt. This includes your mortgage, any loans, all your credit cards, payday loans, and the hundred bucks you owe your brother.
How’s it look?
If your debt is the largest number, you are insolvent.
In other words, if you sold everything, you still would not have enough money to pay off everybody.
Hold on, though. That’s one way to determine it. But, there’s another, the most common, and probably the most useful.
This time you’re going to use your income.
Add all sources of income for the month. Child support, unemployment benefits, side gigs, whatever you have.
Then, subtract out all of your living expenses. Your mortgage or rent, utilities, insurance premiums, childcare, food, fuel, all of it.
Is there enough left to pay your bills? If not, you’re insolvent.
Remember though, that insolvency is not the same as bankruptcy.
Bankruptcy is a legal designation. Insolvency is a financial state.
What’s that mean? People claim bankruptcy BECAUSE they are insolvent.
But listen. It’s not the only option.
There are steps you can take to tackle your insolvency issue.
For example, you can increase your income or reduce your expenses.
Almost everyone can find ways to spend less money. Start with a budget.
But, first, open your bills and see how much you owe.
You’ll know where you stand. And knowledge is power.
Then, set up auto-pay to make sure everything gets paid on time.
Once your spending is under control, the next thing you do is stop with the credit cards. No debit card either.
Pay for your daily living expenses with cash. You’ll spend less.
Insolvency does not have to mean bankruptcy.
But if you find that your situation does not improve soon, you may want to seek help.
The longer you wait to tackle the issue, the fewer choices you may have.
It’s a simple phone call to set up a free, no-obligation consultation with a Licensed Insolvency Trustee.