A couple repossess their property to live better with the proceeds and go into debt

Jean-Marc and Nadine are a couple in their forties, parents of two children aged eight and ten. They bought their house early in their relationship and now have a relatively small mortgage to pay.

“We are almost done paying off our property and its value has increased significantly over time. So we decided to remortgage and have fun,” says Jean-Marc. It all started four years ago, to do a lot of work on the house. At the same time, they bought a 17-foot trailer, because they wanted freedom and travel.

After that, Jean-Marc falls in love with a Motorcycle Kawasaki. “I’ve always dreamed about it,” he said. In Nadine’s case, since she had used vehicles until then, she bought a late model GMC Canyon and financed it for eight years.

But the financial hemorrhage was not going to stop there. In early 2023, they took out a second mortgage on the family home to redo the landscaping and install a swimming pool. However, given their level of debt, this mortgage would have to be issued by a lender that charges higher rates.

It’s no wonder that the monthly payments to repay these loans are piling up, and their income is no longer enough to cover other daily expenses. So they use their credit cards to pay for gas, groceries, etc.

Say goodbye to motorcycle, truck and trailer

Of course, what was supposed to happen happened: with a total debt of $580,000, monthly expenses of over $8,000 and an income of $6,125 per month, they were soon able to resist the financial obligations. .

“It was clear that their budget was in deficit, which explains why the couple had to get credit to make ends meet,” explained Fanny Gélinas-Paquin, Raymond Chabot’s authorized bankruptcy trustee, who handle their case.

Well aware of the choice they had to make, Jean-Marc and Nadine were determined to keep their property, but were ready to give up their motorcycle, GMC truck and trailer.

The trustee says that this couple’s case is rare, and that many people make a financial commitment without first checking if they really have the means. “It’s a shame to finance a building over a long period of time, but these costs add to the monthly budget for many years. You have to weigh the pros and cons carefully,” she says.

She also says that instead of taking out a second mortgage, the couple would have been better off waiting for the first one to be renewed. “At that time, they could have asked for a mortgage margin that would have made it possible to do the development work and buy the swimming pool gradually, and pay it back over a short period of time ,” she said.

Return to a balanced budget

After realizing the bad decisions they made, the spouses were ready to do anything to get out of it. So they followed to the letter the action plan proposed by Fanny Gélinas-Paquin.

They volunteered a GMC truck and trailer, sold their motorcycle and called their mortgage broker to find out what their second mortgage was to consolidate their two loans in one and reduce the interest rate.

A consumer proposal was also filed offering $64,000 to creditors, or $53,000 of debt in addition to the $11,000 loss they incurred when the vehicles were returned. This amount is to be paid back over 60 months, which allows the couple to respect their budget.

THE GOVERNMENT OF HIS HIGHLANDS

Assets:

• Single family home jointly owned by spouse: $420,000
• 17-foot trailer: $30,000
• Amount: 17 000 $
• Truck construction: $70,000

Consumer debt:

• Mortgage 1: $300,000
• Mortgage 2: $100,000
• Trailer loan: $35,000
• Motorcycle loan: $16,000
• Truck loan: $76,000
• Personal loan: $24,000
• Line of credit: $12,000
• Credit cards: $17,000

TOTAL DEBT: $580,000, including $53,000 of unsecured debt

Monthly Income:

• Jean-Marc’s earned income: $2,400
• Nadine’s earned income: $3,500
• Family allowance: $225

Gross income: $6,125

Monthly costs:

• 8036$ (includes two mortgages, three loans, city taxes, phone, electricity, gas, groceries, licenses and registration, etc.)