Messy Family Finances – One Toronto Family’s Solution
Despite the clarity that we try to present our case histories with – finances can be messy.
And for some young families, that have been struggling to get a solid start – finances can be extremely messy.
A case in point is Don and Maria (not their real names).
Originally from the Maritimes, this determined couple in their early 30s have two small children and a dream of financial security.
However, when they first came to David Sklar & Associates, what they had was:
- $40,000 of debt,
- no way to repay it, and
- creditors threatening legal action.
Some of the debt came from Don’s 12 year-old student loans, but much of it came from their decisions to move in hopes of finding work. There were many moves, from the East coast to Alberta to Ontario – as well as moves within each of the provinces they moved to.
Without strong marketable skills, neither Don or Maria were able to find good paying, long lasting jobs. And each move put them further into debt.
Of the two, Don had been the most successful at finding work, and as a result, most of their debts were in his name.
Their last move to a small townhome, in an older Toronto neighbourhood, brought additional stress. Don was accepted to a vocational training course that was subsidized, but brought in only $1,200/month. Maria was unable to find a job and daycare for her two toddlers that would net her more than the child subsidy she was getting of $960/month. This meant that they would have to live on $2,160/month while Don was taking his one-year course.
At this point in time, some of their creditors had had enough and began to put extreme pressure on Don and Maria for payment – threatening to put garnishees on their incomes.
Don and Maria realized that they had to deal with their financial mess quickly – or risk ending up in even more trouble. They decided to try a free consultation with David Sklar & Associates.
During their initial appointment, they met with Serena Peksa, a Certified Insolvency Counsellor, who reviewed their finances and options with them in detail. Personable and professional, Serena put them at ease and helped them to focus on their financial issues with a clarity they had not previously had.
As they were both insolvent, with no assets, they could both file for bankruptcy – however Don and Maria though it would be better for one of them to file for bankruptcy and one of them file a consumer proposal. That way, they would be able to repay at least some of their debt.
After meeting with the trustee and reviewing their situation, it was agreed that Don should be the one to declare bankruptcy, since the debt in his name was the largest at approximately $33,000. His debts included student loans (which were old enough to be removed in a bankruptcy), utility bills, back rent to previous landlords, and moving expenses.
As he was a first-time bankrupt and had no surplus income, Don’s bankruptcy would last for 9 months with monthly fees of $200. This would coincide with the completion of his vocational training – and provide a timely fresh start.
Maria would file a consumer proposal on the approximately $7,000 of debt that was in her name. Her proposal was accepted by her unsecured creditors with monthly payments of $80 to run for 60 months – after which, she would be freed from those debts.
Both Don and Maria, as part of their bankruptcy and consumer proposal agreements, were required to attend credit counselling. During their first session they were able to use their new found financial clarity to begin work on a plan for moving their family towards the financial security they had only dreamed of in the past.
To protect our clients’ privacy, aspects of this case study have been altered