Debt to Obligations Ratio
Question: I have clients that I cannot refinance. Their Thornhill condo was appraised at $335,000, against mortgages of $239,000. Their combined monthly pension income is $2605. Total unsecured debts are $22,421.
Present Monthly Obligations:
Mortgages: $1280
Condominium Fees (all inclusive except phone) $658
Phone bill: $55 Car payment: $ 211/mo
Bill payments: $409
They would like to keep their condo, although I think this is a mistake–75% of their income goes to shelter. If they were to do a proposal or bankruptcy, could they keep the condo and the car?
Answer:
Your clients have some decisions to make.
They certainly can keep their condo and car, as long as they keep the payments in good standing. A proposal or bankruptcy need not impact secured creditors. They should be aware that though they are living on a fixed income, they do have sufficient equity in their property to pay their unsecured creditors in full. They have a number of options available to them, depending on how much they are able to pay each month, who is on title of the property, do they have life insurance, help from family members, the availability of reasonably priced quality rental housing, etc. Your clients should meet with a licensed Trustee in Bankruptcy to guide them through these possibilities, so they can make the most informed decisions possible.
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