The business of Elise’s owner, 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 early last year.
With reduced income and no financial cushion, Elise has to resort to credit to balance her budget. In the end, she ended up with balances of $5,000 on her personal loan and $10,000 on her credit cards. Added to this is a $10,000 student loan for studies completed 10 years ago.
Unable to repay
At first disheartened by her situation, the young woman rolls up her sleeves and shows that she is determined to get out of this bad situation. Therefore, she is actively looking for a new job and is applying for a debt consolidation loan from her financial institution. But during successive periods of lockdown in 2020 and 2021, jobs are not a force in its sector, catering.
What’s more, his lack of financial stability doesn’t reassure his bank, which rejects his loan request. The latter may have agreed on the condition of including a co-signatory in the agreement.
Remember that the co-signer becomes the guarantor of the loan as much as the borrower, a huge responsibility that no one around Elise is willing to take on. At an impasse, she decided to consult a bankruptcy professional to take steps that would allow her to regain her long-term financial balance.
“In the first meeting, we conducted a balance sheet of assets and liabilities and prepared a budget,” explains Sara-Maude Davieau, economic recovery consultant at Raymond Chabot.
Very soon, the young woman not only found herself in a worse situation, but was unable to meet her obligations as the monthly minimum payments on her debts were high. To raise the bar, only two remedies remain: a consumer proposal and bankruptcy.
“Elise wanted to avoid bankruptcy at all costs, so she chose to opt for a consumer proposal. This would allow her to make a single monthly payment over 60 months to pay off a good portion of her debts. In the meantime, if she finds a job and her income increases, she can make higher monthly payments to pay off more quickly.” There will be opportunity,” says Sarah-Maude Davieu.
Back on track
A consumer proposal can include his personal loan, his credit cards, but also his student loan.
In fact, she completed her studies seven years ago, a strict deadline to discharge this type of debt in the wake of a proposal or bankruptcy. Be careful, Sarah-Maud warns Davia, the counter resets every time you register for another training. The final date of completion of studies will then prevail.
“With the consumer proposal, Élise’s credit report will be affected. But by adopting good financial habits, she can rebuild it gradually,” concludes the advisor.
His financial situation
Assets:A paid car worth approx. $2000
Debts of Usage:
- Credit Card: $10,000
- Personal Loan: $5000
- Student Loan: $10,000
Total debts: $25,000
Monthly Income: Canada Emergency Response Benefit $2000 crude
Monthly expenses: $2035 (including rent, telephone, electricity, insurance, groceries, license and registration, gas etc.)