Tapping into the Equity in his Home – Warren’s Story
November 19, 2018
Meet Warren. He’s a successful, semi-retired sales representative, with a cash flow issue. The product that Warren sells carries a long purchase cycle, so his commission cheques were scarce early on. He wanted to see his venture through, was confident in the product he was selling and knew he would see the results of his efforts within six months. Unfortunately, as Warren was building up his commission stream, he fell behind in his bill payments, relying solely on his pension income. As a result, Warren was forced to turn to credit to help pay his bills.
As time went on, Warren felt he was out of options. Quitting sales to find another job with a steady income, meant he would lose all the time and effort he’d already invested into building up his client base. It also meant he would lose out on the commission income he had worked so hard for in the last 6 months.
The other piece to Warren’s story is that he owned a major asset – his home. However, selling his condo didn’t make sense. Vancouver’s tight rental market would cost Warren more per month to rent than he would paying his current mortgage and going further into debt was just not an option – Warren’s existing creditors were no longer lending him additional funds due to his current financial state.
After weighing all his options, Warren decided to seek the advice of one of Smythe’s Licensed Insolvency Trustees
. After assessing his unique situation, the Trustee used his network and contacted a mortgage broker that he knew worked with a wide variety of lenders.
The Trustee and Warren worked with broker to get a new mortgage on Warren’s condominium. This terminated his existing mortgage, resulting in extra funds to help address his current financial situation. What this meant was, Warren could use these funds to file a consumer proposal
to pay back his creditors, in addition to offsetting his living expenses for the next few months as his commission income grew.
In the end, filing for a consumer proposal was a win-win situation for both Warren and his creditors. According to the terms of the proposal, Warren’s creditors would receive roughly 50% of what they were owed within 90 days as a lump sum payment. The creditors did not have to incur the costs of trying to pursue their typical legal remedies to try and get payment; nor did they have to try and force the sale of Warren’s home - an expensive, time consuming and risky proposition. Warren also benefited, as he was able to compromise his debts, keep his condo and continue to pursue his commissioned sales opportunity.
The creditors voted unanimously in favour of Warren’s proposal and he is now on his way to living a debt-free future.