Jean, 52, lost his wife a few months ago after a long illness and is alone with his two teenagers.
The once successful contractor is heavily in debt. As the sole shareholder of his company, he gave up the administration of his company to take care of his wife, who was severely disabled due to a terminal illness.
“I have been failing to file income tax returns and GST-QST returns for the last three years and the balances have been piling up. My business has been out of business for over a year and I am now employed by a renovation company,” explains Jean.
His salary allows him to make a living, but his personal debt and as a director of his former company are far too high for him to make ends meet.
Responsible for the company’s debts
After severely curtailing his company’s activities during his wife’s illness, Jean relied on his credit cards ($30,000) to support the family lifestyle. He also took out a personal loan ($15,000), which puts him in debt for a total of $45,000. He also has $15,000 in personal taxes due.
At the same time, his company is penniless, insolvent and owes $57,000 in GST and QST.
“Even though his company has a separate legal personality from that of its shareholders, Jean is personally responsible for paying the GST and QST as the company’s director,” explains Éric Lebel, Certified Insolvency Practitioner and Partner at Raymond Chabot.
So all in all, Jean owes a total of $117,000. He was unaware that when a company went bankrupt, withholdings on wages, employee holidays and GST and QST amounts had to be paid by the directors of the company as they were personally liable.
A proposal that liberates
The only fortune the ex-businessman owns is his 2010 Ford truck, which is valued at $7,000.
“This property is elusive because it is his work tool,” specifies Éric Lebel. He also owns a $390,000 single family home with a $370,000 mortgage balance remaining. He is very afraid of losing the family home where he lives with his two children. “He is also under intense pressure from his creditors while suffering the death of his wife. The situation is very difficult and he’s very scared,” said Eric Lebel.
In an effort to reimburse the maximum, Jean opted for the consumer suggestion. Below that, he pays a monthly fee of $750 for 60 months for a total of $45,000.
“If he had gone bankrupt, he would have paid $323 for 21 months, but he wanted to offer creditors more to save his house,” says Eric Lebel.
At the end of the consumer proposal, the fifty-year-old is cleared of his $117,000 in debt. This will weigh heavily on his credit file, which will be tainted for several years, but he will be able to get out of the debt spiral and grieve as calmly as possible.
His financial situation
Financial assets:
√ Single family home: $390,000 (mortgage balance of $370,000)
√ Ford F-150 Truck (2010): $7000
consumer debt:
√ Credit Cards: $30,000
√ GST-QST: $57,000
√ Federal and Provincial Tax: $15,000
√ Personal loan: $15,000
TOTAL DEBT OF
CONSUMPTION: $117,000
Monthly income:
√ Net salary: 4250$
Monthly expenses
√ $3500 (including mortgage, local taxes, telephone, electricity, groceries, insurance, gas, etc.)