Jean-Claude, 65, has worked in the same textile production company for years. His job is well paid and he can also work overtime to make ends meet. COVID will destroy its financial balance.
Until March 2020, Jean-Claude was earning $3,500 to $4,000 monthly. He lives in an apartment with his wife, Jeanine, who is retired and receives $1,215 in government pensions.
From a financial point of view, the couple navigates on sight and lives from pay to pay.
Having saved no money, Jean-Claude has also gradually increased the balance on his cards and his line of credit, which amounts to approximately $20,000.
Since he has never skipped a payment, he thinks he is in a good financial position, but something unexpected will turn everything upside down.
Laid off then fired
When Quebec is confined for the first time in March 2020, the company where Jean-Claude works must close its doors for three months. When business resumes in the summer, overtime is eliminated, which greatly reduces the sixty-year-old’s income.
His employer ceased operations again in December 2020 due to supply problems generated by the health crisis. When it reopened a few months later, several positions were abolished because it was no longer possible to maintain a sufficient level of production. That of Jean-Claude goes by the wayside.
The man can count on employment insurance benefits for a few months, but they are not enough to cover his needs and he goes into debt by an additional $10,000 on his credit cards. When the benefits cease, Jean-Claude is now in debt of more than $29,000, to which is added the balance of his car rental ($9,000), for a total of $38,000.
Since he is 65 years old, however, he decides not to start looking for a new job, but rather to retire.
He now receives the QPP and the Old Age Security Pension for a total of $1,350 per month.
Combined with Jeanine’s retirement income, this amounts to $2,565. With expenses that amount to more than $2,470 a month, the couple barely manages to make ends meet. What’s more, Jean-Claude is unable to make the minimum payments on his cards and line of credit, and the creditors are getting more and more insistent.
Best option: bankruptcy
The situation quickly becomes untenable. Not knowing what to do to regain financial stability, he decided to consult a firm of licensed insolvency trustees.
After drawing up a balance sheet of his assets and debts, Maxime Morin, director of financial recovery (consumer), recovery and insolvency group at Raymond Chabot, quickly realized that Jean-Claude would not be able to get by unless you take a more drastic step, either a consumer proposal or bankruptcy, two options in the event of insolvency.
“Given his age, his income, his fragile state of health and the fact that he had no intention of applying for additional credit, the best solution in his case is bankruptcy”, explains Maxime Morin .
In this way, he will be able to eliminate his card and line of credit debts, and will be released from bankruptcy after nine months during which he will pay an amount established in advance to the trustee. Being up to date in the payment of the rental of his vehicle, he can also keep it.
“If Jean-Claude’s income increases because he returns to the labor market, in this case the time required to be released from his bankruptcy could increase to 21 months”, specifies the director in financial recovery. The amount to be paid monthly to the trustee is also likely to be increased.
ASSETS
CONSUMER DEBTS
Total debts $38,000
MONTHLY INCOME
Total revenue $2565
COUPLE’S MONTHLY EXPENSES
