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Real-life story – Home renovations at the cottage undermine his finances

Pierre-André, a municipal employee aged 56, plans to retire in about 5 years. In anticipation of this new stage in his life, he bought a woodland property that includes a rustic cabin. He intends to turn it into a comfortable 4-season cottage. But things won’t go as planned.

Paul-André acquired a large piece of land in the Mauricie region for $45,000, financed by his financial institution. He thought he had made a good deal and planned to renovate the rustic cabin at his own pace to make it habitable year-round. He already envisions enjoying his peaceful countryside property during his retirement and purchased $15,000 worth of materials in spring to start the work as soon as weather permits.

A rocky start

Unfortunately, several unforeseen circumstances have dampened his enthusiasm. Firstly, the late spring prevented him from accessing his land for several weeks. Until mid-June, the roads remained impassable due to lack of maintenance, and as a result, he couldn’t proceed with his plans. To make matters worse, his doctor recently diagnosed him with angina and recommended limiting physical exertion.

«With all these expenses, Pierre-André has no financial leeway. He’s wondering if he should try to sell the cottage in its current state. However, the materials have been delivered and partially used, but the work is far from complete», points out Pierre Fortin, a licensed insolvency trustee and president of Jean Fortin and Associates. The future retiree consulted the trustee firm to find a way out of this predicament.

«Who among us hasn’t undertaken a major renovation project without exceeding their budget? The other problem is that renovations often involve starting with demolition. That’s what happened with Paul-André’s cottage», highlights Pierre Fortin.

A tailor-made solution

The future retiree finds himself in an unfortunate position: even if he wanted to abandon his project, it would be very difficult for him to sell the cottage since the renovations have been left unfinished.

However, the trustee reassures him, stating that the solution is often not as drastic as one might imagine. In Paul-André’s case, in addition to $15,000 in material purchases, he also has $8,500 in credit card debt. «However, he still has a few years ahead of him to rectify the situation before the inevitable decrease in income that follows retirement», mentions Pierre Fortin.

After taking into account Paul-André’s salary, the value of the cottage in its current state (with unfinished work), and the value of the remaining and used materials, the trustee filed a consumer proposal in the amount of $13,500, payable to the creditors in 60 monthly installments of $225, interest-free. «This repayment plan fits his budget, allowing him to keep the cottage while having the opportunity to gradually and at his own pace complete the renovations», emphasizes Pierre Fortin. Thus, Paul-André will be debt-free before his retirement.

  • In a consumer proposal, the trustee calculates the amount that could be offered to the creditors based on what they could expect to receive if the person were forced to declare bankruptcy. Creditors are generally inclined to accept a settlement offer, even for an amount lower than the total debts, if it allows them to recover more money than in a bankruptcy.
  • The success of a consumer proposal relies on a solution where the client and the creditors mutually benefit: on one side, the client reduces their monthly payments to an affordable amount while avoiding bankruptcy, and on the other side, the creditors receive a higher amount than they would have in a bankruptcy scenario.