The business of Elise’s employer, 35, has been greatly affected by the pandemic. So much so that he had to lay off his employees, first temporarily for a few months, then permanently at the beginning of last year.
With reduced income and no financial cushion, Élise has to resort to credit to balance her budget. In the end, she ends up with balances owing of $5,000 on a personal loan and $10,000 on her credit cards. Added to this is a student loan of $10,000 for studies completed 10 years ago.
Unable to repay
At first dejected and depressed by her situation, the young woman then rolls up her sleeves and shows herself determined to get out of this bad situation. Thus, she is actively looking for a new job and is applying for a debt consolidation loan from her financial institution. But during the successive periods of confinement in 2020 and 2021, jobs were not legion in its field, catering.
What’s more, his lack of financial stability is hardly reassuring for his bank, which refuses his loan request. The latter could have accepted on the condition of including a co-signer in the agreement.
Remember that the co-signer becomes a guarantor of the debt in the same way as the borrower, a heavy responsibility that no one around Élise is ready to take on. In an impasse, she therefore decides to consult insolvency professionals in order to take measures that will allow her to regain her long-term financial balance.
“During the first meeting, we carried out a balance sheet of assets and liabilities, and prepared a budget,” explains Sarah-Maude Daviau, financial recovery advisor at Raymond Chabot.
Very quickly, it became apparent that due to the high monthly minimum payments on her debts, the young woman would not be able to meet her obligations, if not only worsening her situation even further. To raise the bar, there are only two solutions left: the consumer proposal and bankruptcy.
“Élise wanted to avoid going bankrupt at all costs, so she preferred to opt for the consumer proposal. This will allow him to make a single monthly payment over a period of 60 months in order to pay a good proportion of his debts. If in the meantime she finds a job and her income increases, she will have the possibility of paying higher monthly payments in order to repay more quickly, ”says Sarah-Maude Daviau.
Back on track
His personal loan, his credit cards, but also his student loan could be included in the consumer proposal.
Indeed, she finished her studies more than seven years ago, a strict deadline for this type of debt to be discharged in the context of a proposal or a bankruptcy. Be careful, warns Sarah-Maude Daviau, the counter is reset each time you register for another training. The end date of the last studies will then prevail.
“With the consumer proposal, Élise’s credit report will be affected. But by adopting sound financial habits, she will be able to rebuild it gradually,” concludes the advisor.
HIS FINANCIAL SITUATION
Assets :Paid car worth approx. 2000 $
Debts of consumption :
- Credit card : 10 000 $
- Personal loan : 5000 $
- Student loan : 10 000 $
TOTAL DEBTS: $25,000
Monthly income : Canada Emergency Response Benefit 2000 $ brut
Monthly expenses: $2035 (including rent, telephone, electricity, insurance, groceries, license and registration, gasoline, etc.)