Sometimes a significant event triggers people to contact our office for debt solutions. In one case we had a daughter contact us because her father had a motor vehicle accident and was unable to work for about 10 months nor maintain an income property during this time. Her father and mother had a personal home in one town and a small apartment building in another. While her father was off work due to the accident, her parents kept the expenses for the apartment building paid by using credit cards and lines of credit (unsecured debt) but they could not afford to pay the property taxes. A. Farber & Partner’s Debt Solutions Manager analyzed the parent’s liabilities and assets, then discussed with them that they could file a joint consumer proposal because their debts, excluding their principal residence, did not exceed $500,000. (All debts were jointly owed and the spouse of the debtor who had the accident had no income other than 50% of the rental income). As joint debtors, the parents took advantage of a new exemption in Ontario where each debtor is allowed a $10,000 exemption in equity in their principal residence. They obtained an opinion of value, and after deducting imputed selling costs, the equity in their principal residence was $9,875 each. Based on this calculation and because of the new exemption which took effect in December 2015, the full equity of $19,750 was wholly exempt on their principal residence. Since the vehicle involved in the accident was damaged there was very little value to creditors. The father still had a good paying job to go back to after he recovered from the accident.
Filing A Joint Consumer Proposal
The parent’s consumer proposal had to offer an amount in excess of the surplus income required to be paid for the family unit. They offered to pay back 55% of their joint debts through a joint consumer proposal. The apartment building would be relinquished to the secured creditor at the filing of the consumer proposal. Any shortfall or deficiency balance owing after the sale of the property would be included in the proposal. The parents were concerned about losing their home but the secured creditor for the apartment building cannot pursue them for the shortfall on the sale of the apartment building after the filing of the consumer proposal. A stay of proceedings would stop any further collection efforts or continuing actions against them or any of their assets.
This case is an example of how there is a way of resolving a problem of significant debt while avoiding bankruptcy. Anytime someone’s employment income or ability to maintain regular bill payments is interrupted by an accident or other unfortunate event, they should contact A. Farber & Partners to see if their unsecured debts can be compromised through a consumer proposal.