CASE STUDIES

Dave and Brenda

Financial Crisis
Dave and Brenda have been married for 10 years and have two young children. Dave earns approximately $3,500/month after taxes at his management job. Brenda is a stay-at-home mother. Their monthly expenses, excluding debt repayment, total approximately $3,300.

The couple’s family home in Vancouver is mortgaged and their car is leased. There is $20,000 equity in their home. Dave has an RRSP worth $4,500, and Brenda’s pension plan was $30,000 when she left work to start a family. The couple has no other assets aside from their clothing and household furnishings and appliances, which have a nominal value.

After 10 years, the couple had incurred credit card debts and unsecured loans totalling $65,000. Dave and Brenda were barely making ends meet, and had been “borrowing from Peter to pay Paul” just to make their minimum monthly payments.

First Steps To Financial Stability
After meeting with Campbell Saunders, who reviewed their family situation, their income, assets and liabilities, Dave and Brenda decided to file a joint assignment in bankruptcy. Dave lost his RRSP in the bankruptcy, but the family’s clothing, household furnishings and appliances and the equity in their home was exempt under federal and provincial law. Furthermore, Brenda’s pension plan was exempt under pension legislation.

Because the couple was up-to-date with their car lease payments, the leasing company allowed them to carry on with the lease. The couple had no obligation to make monthly payments to the Trustee, as their family income was below the “surplus income” guideline. The proceeds from Dave’s RRSP paid for the costs of the bankruptcy administration.

A Fresh Start
After nine months of bankruptcy, Dave and Brenda received an automatic discharge and a fresh start in life.



Cheryl

Financial Crisis
Cheryl is the divorced single mother of a four-year-old daughter. She works
full-time as a supervisor and earns $2,800/month after taxes. Cheryl has never received child support from her ex-husband. Her monthly expenses, excluding debt repayment, total approximately $2,400. Included in this figure is a daycare expense of $300/month.

Cheryl has no assets other than her clothing, household furnishings, and an old automobile worth $4,000. She has accumulated credit card liabilities of $35,000, and has a small outstanding student loan of $3,000 from a business course she completed five years ago.

First Steps To Financial Stability
After meeting with Campbell Saunders, Cheryl considered both a bankruptcy and a consumer proposal. In a bankruptcy situation, Cheryl’s assets are exempt under federal and provincial law, and she will be required to pay approximately $180/mo. to the Trustee, as her income is above the “surplus income” guideline. Cheryl recognizes, however, that her available income after expenses is $400, and she wishes to avoid a bankruptcy. Cheryl’s student loan is a debt that will not be discharged by either a bankruptcy or a consumer proposal, but student loans will be “stayed” from collecting on the loan for the term of the proceeding.

Cheryl decides to file a consumer proposal offering her creditors $250/month for three years. After her regular living expenses and the proposal payment, she will also have enough money left to set funds aside to pay her student loan when she has completed her proposal.

A Fresh Start
Cheryl’s creditors voted to accept her consumer proposal, which gives Cheryl the chance to avoid a bankruptcy situation and allows her to pay an affordable amount to settle with her creditors.



Michael

Financial Crisis
Michael is a middle-aged single man who currently earns approximately $3,200/month, after taxes, at his job as a welder. His monthly expenses, excluding debt repayment, total $2,500.

Up until one year ago, Michael owned and operated a corporation and gave personal guarantees for business loans and an operating line of credit. Michael was the sole director and shareholder.

When Michael ceased operating Weldco, the banks called on the personal guarantees Michael gave, totaling $80,000, and Canada Revenue Agency (“CRA”) raised a director’s liability assessment for an outstanding GST liability of $75,000.

Michael had no other debts and no assets, but CRA was about to begin garnishing his wages due to the outstanding director’s liability assessment.

First Steps To Financial Stability
After meeting with Campbell Saunders, Michael considered both a proposal and a bankruptcy. In a bankruptcy situation, Michael would pay $750/month in surplus income, and his bankruptcy would likely be extended beyond the initial nine months due to the extent of his surplus income.

A Fresh Start
Michael chose to file a proposal offering his creditors $600/month for 36 months. A meeting of creditors was required to vote on the proposal. CRA was the only creditor present and voting, and they took the position that the recovery in the proposal was too low. Michael and CRA negotiated at the meeting, and an amended proposal, offering $700/month for 48 months, was accepted.