Divorce Summary - Desperate for support

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epardy

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Although I am not the one going through this divorce, my boyfriend is and I've witnessed exactly how much stress he is been put through because of this. I want to be able to provide him with accurate or opioninated advice from other members that are going through the same thing, or have experienced it directly or indirectly.
I'll have to give you the entire story.
For the sake of these people, I will change their names to John and Jane.
John is in the Canadian Forces and has been for 8 years. He was with Jane for 4 years and married for JUST over 1 year. They presently have a home together, and shared two joint debts (Line of credit for their wedding, and a vehicle loan).
They split up and began their seperation paperwork in Februrary 2010 upon John's return from overseas. When she left, she took the vehicle with her. This was the joint vehicle loan. Through the seperation paperwork, he agreed to continue paying the vehicle loan (as he was doing this prior to their seperation). She was to make the line of credit payments and continue paying her own individual debts. He soon stopped making ALL payments on items in her possession and it was agreed if she wanted it, she would maintain the payments.
She left about 80-90% of her belongings in the home and after much discussion between the lawyers, she provided a list of the items she wanted. All items (plus more!!) were given to her at her request. To protect John, all of the items were put into the drive way, properly covered and protected to make her pick-up easier and to avoid confrontation.
They have been seperated for 1 year and 5 months. Within the last 4 months, John received a phone call from Jane's Bankruptcy trustee. He was informed that Jane had declared bankruptcy. They were inquiring about the home in their name. John has agreed to buy her share out and the bankruptcy trustee made a deal for him to pay $1500 to buy her half. This does not include transfer fee's, which we are in the process of finding out currently.
John has now started receiving phone calls from the creditors (Line of credit and the vehicle loan). He has found out that the vehicle has since been repossessed and they are wanting their money (or monthly payments) immediately. Jane had stopped all payments approximately 3 months prior to declaring bankruptcy.

This has tripled John's debt load and he feels he cannot maintain it any further so this has put him into a position to declare bankruptcy.

Keep in mind during the last 4 months, John has been out of the province and having to deal with this entire mess. His lawyer says everything is at a 'standstill'. Even though it is an uncontested divorce, nothing is being done to finalize anything. His lawyer is Karinda from Kaufman and associates in Trenton, Ontario. Any feedback about them??

John has inquired about bankrutcy through numerous trustee's. Becuase he's in the Military, they advised him to claim a Consumer Proposal, because any income from tours or projects is tax free and in a Consumer Proposal, cannot be touched but in bankruptcy will be factored in.
He was advised that he would be paying roughly $500/month for a minimum of 21 months for a Consumer Proposal. He JUST found out that Consumer Proposal includes the household income (which would include mine) and therefore bring his payment up to approximately $700-$750/month for min. 21 months.
Does anyone know anything more about Consumer Proposals? Can he claim this on his vehicle loan, line of credit, consolidation loans etc?

Why hasn't his divorce paperwork gone through yet? Is his lawyer hurting him more than helping him?
We have not heard anything from Jane Doe, and as far as we know - it's settled other than a) no divorce b) John's financial converns.

Any suggestions would be GRATEFUL!!!
 
A consumer proposal can be extended for longer than 21 months - up to 60 I believe. That would lower his payments. It basically works like this - they offer creditors a percentage of the total debt, say 30%. If the creditors accept the deal, he pays the debt off monthly over up to 5 years. Usually, the creditors won't fight it because if they do he will be forced to accept bankruptcy and they'll get even less money. IF at any time he comes into extra money, he can pay the debt of early.

The benefit over bankruptcy is that he doesn't lose much. Just money. AND if you win the lottery in the mean time, he only has to pay the agreed upon debt. A bankruptcy would take half your winnings. :) AND you get to keep your tax return (which you can use to pay down the debt faster).

The part that sucks is, you might as well be in bankruptcy. The proposal won't be discharged for 3 years AFTER the debt is paid which, if you pay for 5 years would mean 8 years of really bad credit - which is the same as a bankruptcy. However, like I said above, IF the debt gets paid out earlier, then your 3 years starts at that point.

I think a proposal is the same as bankruptcy - you can include any debt that is NOT insured (might not be the right word). Lines of credit and consolidation loans should be included.

There is TONNES of information on-line. Just google bankruptcy ontario.

Oh! Word of advice! SHOP AROUND! NOT all trustees are created equal. Some will require more than others. Look for one that will get you the best deal with the creditors.

Good luck!
 
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Thank you for the information CSAngel.
We know that much information, but it's great to be reassured through another party it's accurate. He's spoken to numerous trustee's through the whole process and it seems information is very scattered and somewhat unreliable.
When he decided he wanted to go ahead with it because it was the best decision for him and would secure his future, he had to do a prescreening. At that pre-screening they told him it was the "household" income. Can he get away with doing his individual income to save him money over the course of this CP (consumer proposal)?
If not, how can this negatively impact ME in the relationship? Is there any way I can be affected by his decisions present day that could affect me in the future (marriage?) Just want to run all of our possibilities.

He seems to believe that the CP is the best because he can pay it off sooner without a penalty. After a tour for example, he could potentially pay off the entire balance.
The total debts total around $40,000 (rough numbers), but he predicts he can have it paid off much sooner than anticipated. He just can't take on the debt load she has dropped on him.

Since the vehicle has been repossessed, it gives him an R8 credit rating (R7 is CP, R9 is bankruptcy), so he's already half way in the water, he mise well dive in, right?

Thoughts on all of this?
 
I weighed both possibilities and in the end went for the bankruptcy because it was 9 months (I snuck in before they changed the length of time and had a trustee who didn't extend my time, which they can do) compared to 5 years and there was just no way I could make the payments for 5 years and survive - my budget was already super tight and I pay child support and childcare as well. I ended up borrowing from family just to make it through the 9 months but in the end it was WORTH IT! I am debt free!!!

The household income thing is true. If my teenage son had been working I would have had to include his income - crazy, I know, but that's how it works. There's no way around that as far as I know unless you move out.

This was one of the toughest decisions I ever made but I'm a year past discharge, have a secured credit card, and am slowly rebuilding. It is worth it! The stress of debt is just too much. Especially when coupled with the fact that it's not all your own!!
 
Absolutely and we've discussed it in so much depth. I know he just wants a clean slate and start fresh. The Bankruptcy thing definitely won't be his best option because he loses his tax income and all tax free income. It all has to be reported and if he does 1 tour at say $30,000 tax free income - Bankruptcy takes that, where as CP doesn't!

Even though you state there is "no way around it", is there a high possibility he would get audited or 'caught' for claiming only his income? It's sooo confusing, let me tell you!

In the meantime, is there anything he can be doing? Should he be finalizing his divorce so Jane cannot come back after anything else? or is his main priority the financial aspect.

For the record, he has been given the user and pass to this site, so he will possibly be posting his own stories/questions. Just in case anyone things I'm suddenly bi-polar.
 
epardy said:
Absolutely and we've discussed it in so much depth. I know he just wants a clean slate and start fresh. The Bankruptcy thing definitely won't be his best option because he loses his tax income and all tax free income. It all has to be reported and if he does 1 tour at say $30,000 tax free income - Bankruptcy takes that, where as CP doesn't!

Even though you state there is "no way around it", is there a high possibility he would get audited or 'caught' for claiming only his income? It's sooo confusing, let me tell you!

In the meantime, is there anything he can be doing? Should he be finalizing his divorce so Jane cannot come back after anything else? or is his main priority the financial aspect.

For the record, he has been given the user and pass to this site, so he will possibly be posting his own stories/questions. Just in case anyone things I'm suddenly bi-polar.
Click to expand...

Good question - not sure if he could be audited. I wouldn't take the chance though. It would only take a vindictive ex and one quick phone call to screw him over.

Did you see the news article yesterday on equalization payments being included in a bankruptcy? I imagine that would include consumer proposals as well. There's a thread on it here. Not sure if it would help you though.

I would file asap if possible, the sooner he files, the sooner it's over. I don't know how that would affect his separation though. Best to consult a lawyer.
 
Thanks! Passing this information off immediately. Can you forward me the link for the post about equalization payments. Don't know anything about it!
 
Just read the link over. It doesn't look like it would apply to John in this situation. Jane has already declared bankruptcy leaving all debts in his name. He made a significant more amount of income than she did so in this situation, I believe he would owe HER equalization payments. Becuase she's declared bankruptcy - he owes her nothing at this point. He just had to find a way to protect his butt with his finances. This is why he is considering bankruptcy now.
 
Has he tried explaining the situation to the creditors to determine if they would be willing to work with him to come up with some sort of equitable payment plan? Perhaps they would be willing to let him do interest only payments or 1% for a while to give him time to get his finances in order and try and cover this stuff? FYI the normal agents you'd speak to wouldn't have the ability to deal like this...ask for the supervisor and work your way up from there.

The creditor's would be able to change that R9 to a "paid in full" if he was able to make arrangements with them.... any negotiations to that effect should include that clause and that they send him the agreement in writing, on their company letterhead. (In case they screw around, he can send the letter to the credit bureau to have it removed).
 
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