case studies,  consumer proposal,  credit cards

My mother is 53 years old and $50,000 in credit card debt

Hello there. I’ll explain myself a bit

Basically my mother has nearly 50K in credit card debt with her multiple cards. This was acquired just by living expenses since my mom didn’t work much through covid (health problems)

My mom is 53 and has pretty much been financially downtrodden constantly, she first went bankrupt on student loans whenever just before the cutoff where you could not go bankrupt for student loans anymore, 15 something years ago I’m not sure. The majority of her paycheque goes towards the minimums for all her cards and will take her 2 decades to pay off. Recently she has talked about claiming bankruptcy but is thinking about doing a consumer proposal instead. From what she understands-

  1. 80 something percent of her debt would be wiped out and she would have to pay in the range of like 300 bucks a month for the next 5 years. She did some calculation on a website and found that figure.

  2. Her credit would be horrible and she would not be able to get any credit cards for the next 5-7 years.

  3. She will still get her GST and whatever other money the government gives her (climate incentive etc) and be safe from any wage garnishing with the consumer proposal too.

I understand that having good credit is great and all but were pretty poor, we don’t plan on buying or renting any property / houses in the near future due to not being able to afford it and with my mothers current job actually paying for her housing.

We will need a newer car in the next 5 years probably but I’m 19 without any credit problems so I guess stuff can just go in my name.

I’m kinda confused on how all this works but I just want to make it as easy as possible for my mom. Thanks for any help.

 

Victor Fong, Licensed Insolvency Trustee responds:

80 something percent of her debt would be wiped out and she would have to pay in the range of like 300 bucks a month for the next 5 years. She did some calculation on a website and found that figure.

Assuming your mother’s creditors accept her consumer proposal then that is correct; $300/month for 60 months ($18,000). But whether your mother’s creditors will accept her CP will depend on the following factors:

  1. Her monthly net income

  2. Whether she’s previously been bankrupt

  3. Whether she has assets of any value such as real estate, financial assets, a motor vehicle, etc.

  4. If she’s married, her spouse’s net income

  5. Her cash flow. Specifically, the amount of money she has left over in her budget after paying her living expenses and her CP payment of $300. If she has money left over, her creditors might ask for an increase in the monthly payment.

Her credit would be horrible and she would not be able to get any credit cards for the next 5-7 years.

Her credit score will be negatively impacted and her CP will stay on her credit history for 3 years after she pays her CP in full or 6 years after the date she files her CP, whichever happens first.

With that being said, she can start rebuilding her credit score after her creditors accept her CP using the 2/2/2 method of rebuilding a credit score:

  1. 2 secured credit cards (e.g., Capital One Secured Mastercard and Home Trust Visa)

  2. $2,000 credit limit on each card

  3. 2 years repayment history

I discuss this in detail in this video on Instagram.

She will still get her GST and whatever other money the government gives her (climate incentive etc) and be safe from any wage garnishing with the consumer proposal too.

Yes, that is correct.

Victor is the President of Fong and Partners Inc. He is a Licensed Insolvency Trustee and Chartered Professional Accountant. With many years of experience in the insolvency field, Victor has been involved in both corporate and consumer insolvency engagements. Previously with a large national firm, Victor founded Fong and Partners Inc. so that he could dedicate his professional life to help people from all walks of life to deal with their debt.