Real-life case – Separated and forced into bankruptcy

Separated from the father of her child 2 years ago, Martine still has not recovered financially. Stuck with debts of $ 25,000 and receiving a before tax income of $ 40,000, she is far from seeing the light at the end of the tunnel.

As a couple, we usually share financial obligations. But once separated or divorced, each has to face his or her own expenses (rent, heating, car payments, etc.) with only one income.

To make ends meet, Martine had to use her credit cards and line of credit. Gradually, she got bogged down in debt, unable to make ends meet. Today, she has to pay a minimum of $671 a month to pay off her debts with a net monthly salary of $2,700.

Here is what she did:

Determined to get out of her unfortunate position, Martine met with a Licensed insolvency trustee. Very quickly, the financial analysis performed by the trustee showed that the bankruptcy was the most appropriate solution for Martine. Although she knew it would help her solve her financial problems, she had a lot of questions and worried about things would play out.

First, once the decision is made, documents (List of assets, debts and a budget) are prepared by the trustee, signed by Martine and sent to all her creditors within five days of filing the file. “His employer will be informed, but his ex-spouse will because they had contracted certain debts together. Otherwise, he would not have been informed”, explains Pierre Fortin, Licensed insolvency trustee and president of Jean Fortin et Associés.

Martine’s post-bankruptcy budget:

Martine will keep her bank account and her pay could continue to be deposited there without the risk of garnishment. All monthly payments on his debts will cease on the first day of her bankruptcy, giving her an additional $671 per month to work with. On the other hand, she will have to return all her credit cards to her financial institution, whether there is an outstanding balance or not. “Many people worry that they will no longer have access to their cards or lines of credit. What they do not realize is that by having no more debts to pay, there will be no more deficits and therefore no more need for credit cards to make ends meet.” says Pierre Fortin.

How can Martine make purchases on the internet without a credit card? Simply by using a prepaid card that she will have no difficulty obtaining from her financial institution or organizations such as Canada Post. She will be able to keep her car if she makes her payments on time.

Finally free?

From the first day of her bankruptcy, Martine is protected against any proceedings by her creditors. Her debts will be cleared at the end of the bankruptcy, which will in principle occurs nine months after the filing. If her average income was higher than the standard set by the Office of the Superintendent of Bankruptcy ($3,000 net per month in her situation), the bankruptcy would be extended for another 12 months. Martine’s credit report will be rated R-9 for 6 years (Equifax) and 7 years (TransUnion) after the bankruptcy is finished.

**The names have been changed to protect their identity.**