Head of a single-parent family with two children in her care, Zoé worked full-time for a municipality. A return to school, however, will cause a gradual indebtedness that will force her to sell her house.

After her separation in 2018, Zoe bought a single-family home using her RRSPs for the down payment. One of his two children attends private school to be able to have access to a specific sports-study program.

While employed at the municipality, Zoé managed to make ends meet, but last year she decided to go back to school.

From now on, she can only count on an amount from a government employment assistance program, family allowances and the GST credit, for a monthly total of 3650 dollars.

Her monthly expenses amounting to 3980 dollars including the repayment of the mortgage loan (1150 dollars), so she is gradually getting into debt. His credit card balance climbs to $36,000, plus a personal loan of $5,000 and his student loan ($11,000).

She fell behind in paying her municipal taxes ($2,500) and school taxes ($400) and still has $7,500 to pay on her car loan. To make matters worse, water infiltration on her property requires urgent work, but she does not have the cash to do it. Her situation is deteriorating rapidly and she fears losing her house.

Choice time

Zoé is also struggling to make minimum payments on her credit cards. “And as soon as I do them, I have to reuse the credit freed up to pay for other expenses,” laments the 32-year-old woman.

Fanny Gélinas-Paquin, licensed insolvency trustee and director of financial recovery (consumer) at Raymond Chabot, analyzed her file.

"Its budget is in deficit even considering only the fixed costs," she says.

Zoé still has two years of studies ahead of her and therefore her financial situation will not improve in the short term. She wishes she could keep her house and keep her son in private school, but she realizes she will have to make choices.

An inevitable sale

Fanny Gélinas-Paquin offered three options to Zoé. The first requires selling his house: it has taken on a lot of value and the price obtained will allow him to repay his debts (credit cards, personal loan and student loan) and even to have a small safety cushion.

He will need to find a place to rent that is equivalent to his current mortgage payment.

The second option is to remortgage the property for a higher amount. His bank, however, refused given his precarious financial situation and the work required on the house.

Third solution: the consumer proposal. This is preferable to bankruptcy, because in this case, his house would be seized and sold to pay off his creditors since its value is greater than the debts.

With a proposal on the other hand, she will keep her house, but will have to offer creditors an amount covering all of her unsecured debts (cards, loans).

If they accept, she can repay over a maximum of 60 months and the interest will stop running. However, this would require squeezing his budget to the maximum, disposing of his car and withdrawing his child from private school.

Zoé finally decided to sell the family home.

This decision was difficult, but freed him from considerable stress. Debt-free, she was able to continue her studies with peace of mind, keep her car, leave her son in private school and even had some money left over as a safety cushion.

Assets

Debts

TOTAL DEBTS: $263,400

Monthly income

TOTAL REVENUES: $3650

Monthly expenses: