Jean-Marc and Nadine are a couple in their forties, parents of two children aged eight and ten. They bought their house early in their relationship and now have a relatively small mortgage to pay off.
“We are almost finished paying off our property and its value has increased significantly over time. So we decided to remortgage and treat ourselves a little,” says Jean-Marc. It started four years ago, in order to carry out major work on the house. At the same time, they bought a 17-foot trailer, because they wanted freedom and travel.
Subsequently, Jean-Marc fell in love with a Kawasaki Motorcycle. “I had always dreamed of it,” he confides. As for Nadine, having only had used vehicles until then, she bought a latest model GMC Canyon and financed it over eight years.
But the financial hemorrhage was not going to stop there. At the beginning of 2023, they took out a second mortgage on the family residence in order to redo the landscaping and install a swimming pool. Given their level of debt, however, this mortgage had to be taken out with a lender who charges higher rates.
Unsurprisingly, the monthly payments to repay these loans pile up, and their income is no longer enough to cover other everyday expenses. So they use their credit cards to pay for gas, groceries, etc.
Goodbye motorcycle, truck and trailer
Obviously, what had to happen happened: with total debts of $580,000, monthly expenses of more than $8,000 and an income of $6,125 per month, they were quickly no longer able to meet their financial obligations. .
“Their budget was clearly in deficit, which explains why the couple had to resort to credit to be able to make ends meet,” explains Fanny Gélinas-Paquin, licensed insolvency trustee at Raymond Chabot, who handled their case.
Well aware that they will have to make choices, Jean-Marc and Nadine absolutely wanted to keep their property, but were ready to give up the motorcycle, the GMC truck and the trailer.
The trustee mentions that the case of this couple is not rare, and that many people make financial commitments without first checking whether they really have the means. “It is tempting to finance a property over a long period, but these expenses add to the monthly budget for several years. You have to weigh the pros and cons carefully,” she says.
She also points out that instead of taking out a second mortgage, the couple would have been better off waiting for the first to be renewed. “At that time, they could have requested a mortgage margin which would have made it possible to carry out the development work and purchase the swimming pool gradually, and to repay over a short period of time,” adds -She.
Return to balanced budget
After realizing the bad decisions they made, the spouses were ready to do anything to get out of it. They therefore followed to the letter the action plan proposed by Fanny Gélinas-Paquin.
They voluntarily surrendered the GMC truck and trailer, sold the motorcycle and contacted their mortgage broker to check the maturity of their second mortgage in order to combine their two loans into one and reduce the interest rate.
A consumer proposal was also filed, offering creditors an amount of $64,000, or $53,000 of debt plus the loss of $11,000 they suffered when returning the vehicles. This amount is repayable over 60 months, which will allow the couple to respect their budget.
THEIR FINANCIAL SITUATION
Assets :
- Single-family house in co-ownership with spouse: $420,000
- 17-foot trailer: $30,000
- Moto: 17 000$
- Camion pick-up: 70 000$
Consumer debts:
- Mortgage 1: $300,000
- Mortgage 2: $100,000
- Trailer loan: $35,000
- Motorcycle loan: $16,000
- Truck loan: $76,000
- Personal loan: $24,000
- Line of credit: $12,000
- Credit cards: $17,000
TOTAL DEBT: $580,000, including $53,000 in unsecured debt
Monthly income:
- Jean-Marc employment income: $2400
- Nadine’s employment income: $3,500
- Family allowances: $225
TOTAL REVENUE: $6125
Monthly expenses:
- 8036$ (including two mortgages, three loans, municipal taxes, telephone, electricity, gas, groceries, license and registration, etc.)
