Unmanageable debts after a work stoppage

Annabelle was laid off during the pandemic. This situation not only caused her financial problems, but also plunged her into depression, in addition to tensions with her family.

The young woman of 29 tried to find work, but without success. Although she has a university degree, she could not find a job in her field.

It must be said that several companies have had to limit or suspend their activities during the successive lockdowns, making the task more difficult for him.

Fast loans at exorbitant costs

As an unemployment insurance claimant, Annabelle is paid $1,780 a month. Although her budget is tight, she could still get by with that amount, but she has accumulated outstanding balances on her credit cards ($9,000) and personal line of credit ($33,000).

To make ends meet, she also got several small quick loans totaling $1,200. A sum that keeps growing due to the exorbitant interest rates of 30 to 40% charged by these alternative lending companies.

“When she came to us, Annabelle was no longer able to make the minimum monthly payments on her debt and the collection agencies started to harass her,” says Pierre-Olivier Dubois, Director of Financial Collections (Consumer) at Raymond Chabot . .

After reviewing her file and preparing a budget, the expert also discussed her short, medium and long-term job prospects and estimated potential income.

Take back control of your finances

Debt consolidation was considered as the first solution. This loan, granted by a financial institution, makes it possible to collect all debts and make only one payment per month.

This formula is much easier to use than multiple repayments to multiple creditors. Unfortunately, because she is unemployed and her credit report was marred by her heavy debt burden, the bank refused to grant her the loan.

Pierre-Olivier Dubois then proposed two other options: the consumer proposal and bankruptcy.

Avoiding the latter at all costs, Annabelle preferred to opt for the proposal. Administered by a trustee, it allows you to repay all your creditors at once, but only in one monthly payment, with no interest and over a maximum of 60 months.

“The payment offered in the proposal respects the person’s budget and allows them to regain control of their finances,” says the Director of Financial Recovery. In Annabelle’s case, an agreement was reached with her creditors that she would pay $200 a month for five years.

In addition, if the young woman finds work, she also has the opportunity to repay the proposal more quickly and thus rebuild her loan more quickly. By the end of the proposal, the credit rating will initially be R-9, the worst, and then move to R-7 for a period of three years.

HIS FINANCIAL SITUATION

Financial assets :

  • Financed car worth $6500

consumer debt:

  • Credit card : $9000
  • Personal Credit Line: $33,000
  • Alternative loans (30 to 40% interest rate): $1,200

TOTAL DEBT: $43,300

Monthly income :

  • Employee insurance: $1780

Monthly expenses:

  • $1780 (including rent, telephone, electricity, insurance, groceries, license and registration, gas, consumer proposal reimbursement, etc.)

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