Credit Card Debt Spiral
Nate and Shelly (not their real names) were a pleasant Toronto couple raising two teenage children on a limited income. Although Shelly was sometimes able to supplement their income with a part-time job, it was still challenging for them to make ends meet.
Like many people living in Toronto, they got trapped in a debt spiral to sustain their lifestyle and ensure the bills got paid. They turned to a line of credit to pay off their credit cards. And when they ran their credit cards back up, they opened a second line of credit to pay their new balances. They then ran their credit cards back up a third time.
Nate and Shelley were falling further and further into debt, with less and less disposable income to cover their payments.
Seeking a way to escape their credit card and line of credit debt cycle, they sought help from David Sklar & Associates.
How David Sklar & Associates were able to help Nate and Shelley reign in their debts
During their initial meeting, Richard Sklar, an Estate Administrator, reviewed their financial situation in detail. Shelly explained that she had to make several lengthy visits to her ailing mother in Saskatoon over the past few years, which was why they had used their credit cards so much. It was also why Shelly could not get a full-time job to help with the family’s income.
Nate and Shelley were renting, did not own a home, and their few possessions were exempt from bankruptcy.
At the time of their meeting, the Toronto couple was responsible for the following debts:
Licensed Insolvency Trustee
| Lines of Credit | $35,000 |
| Credit Cards | $32,000 |
| Bank Overdraft | $4,000 |
| Total Unsecured Debts | $71,000 |
Although bankruptcy was a real option, Nate and Shelly were adamant in their desire to pay back as much as they could to their creditors.
After discussing all of their options with Richard, they decided to file a consumer proposal, which would reduce their debt load and allow them to pay manageable monthly payments.
Here's how much Nate and Shelley were able to save by filing a consumer proposal
With guidance from Richard,
Nate and Shelley created a proposal for their creditors where they would repay $22,800 of their existing debts of $71,000. Once David Sklar & Associated submitted the proposal, the creditors happily accepted the terms.
Under the proposal, Nate and Shelley would pay $380 monthly for the next 60 months. Based on Nate’s monthly net income of $2,700 (Shelly did not have a job at the time of filing), $380 was a monthly amount they could afford.
The couple would make these payments directly to David Sklar & Associates, who would, in turn, distribute the funds to their creditors.
As a result of filing the consumer proposal, Nate and Shelley will have eliminated over 68% of their unsecured debts.
We fully expect that Nate and Shelley will complete their consumer and honour all the agreement terms. In many ways, they epitomize the “honest but unfortunate” debtor that Canadian laws are in place to help.
To protect our client’s privacy, aspects of this case study have been altered.
Photo by Elina Fairytale from Pexels, Photo by Karolina Grabowska
Calculate savings
Consumer Proposal - 0% Interest
Debt Consolidation Loan - 30% Interest
Do Nothing - 19% Interest
* Calculations above are made over a 5 year period at a rate of 80% savings. This calculator provides an estimate of the total savings you may receive when filing a consumer proposal. Actual results may vary. Your payments will depend on your income, assets, and debts.
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Learn how we can help you find debt relief with a consumer proposal or personal bankruptcy. Our passionate and experienced team at David Sklar and Associates has helped thousands of individuals break free from crippling debt payments. Our experts can answer any questions about your debts and recommend a solution based on your unique needs and goals.
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