Pierre and Hélène, a couple in their forties, have steady jobs. They have three young teenagers.
The couple recently remortgaged their house with a 150,000 $ loan. The mortgage almost represents the actual market value of the house making it impossible to get more from the mortgage broker.
Remortgaging did not solve all of the debt the couple had, they owed more than 50,000 $ on credit cards, both had a 20,000 $ line of credit used up at 100% and leased vehicles.
Considering the extend of their indebtedness, it’s no longer possible for them to get a consolidation loan from a financial institution. In fact Pierre and Hélène do not meet the required standards for such a loan.
Also, Hélène does not need her car anymore, a payment of 400 $ a month. But returning the vehicle will result in paying a residual amount of 10,000 $, given the failure to respect the current lease.
Meeting with a trustee
After analysing the couple’s budgetary position, we realised that the maximum monthly payment possible for all the creditors, other than the mortgage and car payments, would be 500 $ per month.
We prepare and make a consumer proposal for the couple as follows ;
- Continued mortgage payments.
- Continued payments on Pierre’s car lease.
- Return of Hélène’s leased vehicle.
- Paying a sum of 30,000 $ in a (60) sixty month period, with 500 $ monthly payments, for all other debts (about 100,000 $), such as credit cards, credit lines and the debt resulting in the return of Hélène’s leased vehicle.
The creditors vote in favor of the proposal. Pierre and Hélène respect the terms of the said proposal and are freed of their debt. They keep their house. With a balanced budget, they can devote their entire time to their family and their work.
This is of course a fictitious situation, which shows well the type of agreement we make on a regular basis with creditors in the context of a consumer proposal.