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I met with a couple who had just moved back to Ontario from British Columbia with their daughter. They were now separated and the consultation was only for him. However, his ex-wife came to the consultation to see what his options were, and how they might affect her if he had to file a Consumer Proposal. Their agreement before they moved back to Ontario was that they would use all the equity available from their house in B.C. to purchase a property in Ontario.

Joint-Ownership-Of-Home-BenefitsThey were able to pay for the new property in full (with equity from the B.C. house) and he had used his 50% of the equity to help purchase it, so their daughter would have a stable place to live. The new property had a “granny flat” that their daughter lived in. She has since moved off to university, and will be gone for the next 5 years.

The couple’s concern was that since there was no mortgage on the new house, how would it affect the ex-wife if her ex-husband was to file. He had approximately $90,000 in consumer debt.

Taking his 50% of the home equity into account (approximately $100,000) and that he was not able to afford a proposal payment plus be able to pay his monthly expenses, my suggestion was that the ex-wife allow him to move into the “granny flat” so he would still be separated from her, but have his own place to live rent free for the next 5 years.

This would enable him to make his monthly proposal payments to pay off the debt in full over five years. But at the end of that period, he would be debt free and they would still retain ownership of the property which would be an important asset for their future.

Consumers often fear that filing a consumer proposal or bankruptcy will mean the loss of their home. This story shows that’s not necessarily the case and that home ownership can, in fact, have a positive effect on the resolution of debt issues.

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