Get back afloat after being sunk by containment

Already heavily in debt before the pandemic and juggling credit cards, Monique and Luc have seen their situation deteriorate considerably since last spring.

Even though Luke earns a good salary until early 2020, that is not enough to balance family finances. Self-employed, his wife works in the field of housekeeping and her income fluctuates from month to month. To compensate for the shortfall, they regularly resort to credit cards.

However, the spring confinement has disastrous consequences for Luc, who suddenly finds himself unemployed. As for Monique, she loses most of her contracts and only has a handful of clients. With the resumption of activities during the summer, Luc can fortunately start working again, but his employer has had to reduce his hours, which results in a sharp reduction in family income.

Unable to pay their daily expenses while paying off their crushing debts, the couple must resolve to make a radical decision.

One card to reimburse the other …

With six credit cards, two personal loans and overdue self-employment tax bills, the couple racked up $ 80,500 in debt. Added to this is their mortgage of $ 192,000 and two auto loans totaling $ 33,000.

In terms of net cash flow, they can count on $ 2,600 on Luc’s side and $ 1,500 on Monique’s side, or $ 4,100. Their monthly expenses, including payment for their vehicles, amount to $ 3,650. In other words, they do not have the leeway necessary to repay their debts, especially the credit card balances on which run interest rates high of nearly 20%.

In an attempt to cover their budget deficit, they continue to use their credit cards, often using one to make the minimum payment on the other.

“When they came to see me, the couple’s situation was untenable and they had started receiving calls from collection agencies,” explains Sarah-Julie Fortin, senior financial recovery advisor at Raymond Chabot.

A proposal that frees

The advisor first checked whether it would be possible to pay off their debts by selling their property.

“Although there is equity on their residence, it is insufficient to reimburse everything. They would therefore have been forced to continue making several large payments. In addition, the couple wanted to keep their house, ”says Sarah-Julie Fortin, who has therefore explored other possibilities with her clients.

Bankruptcy is one of the possible solutions, but in this case, in order to keep their property, they would have had to pay their creditors an amount equivalent to the equity. This option was therefore ruled out and the couple turned instead to the consumer proposal. Thanks to this, they will be able to repay a portion of their debts, without interest, over a maximum period of five years.

“They will make monthly payments of $ 600 for 60 months, for a total of $ 36,000,” explains the advisor.

They will have to tighten their belts a bit and cut back on some expenses, but they will still be able to keep their homes and the cars they need to get to work. At the same time, they are relieved of a good part of their debts, including overdue taxes. These can indeed be included under certain conditions in a consumer proposal. However, their credit report will be damaged for the duration of the proposal (R-9 rating, as for a bankruptcy) and up to three years thereafter, when their credit rating will then drop to R-7.



  • Monique’s vehicle, 2016 Honda Civic: value 14 000 $
  • Luc’s vehicle, 2017 Kia Forte: value 11 500 $
  • Single-family residence: value of 225 000 $

Couple’s consumer debts

  • Six credit cards totaling 57 000 $
  • Two car loans totaling 33 000 $
  • Two personal loans totaling 16 000 $
  • Mortgage: 192 000 $
  • Tax debts for self-employed workers (current year and arrears): $ 2,500 federal and $ 5,000 au provincial

TOTAL CONSUMER DEBTS: $ 305,500, including $ 80,500 of unsecured debt

Monthly net income

  • Monique’s income: 1500 $
  • Luc’s income: 2600 $


Monthly expenses

  • 3650 $ (including mortgage, taxes, telephone, electricity, car loan, insurance, groceries, etc.)
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