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Self-Employed Brampton Couple Rebuilds With A Consumer Proposal

self employed consumer proposalYou have to be an optimist to be self-employed.

It’s a requirement.

No one that was not optimistic about the future would take the risk to start a business. But it is a risk and sometimes things don’t turn out the way you hope.

Even long established successful businesses are subject to the wider trends in the economy. A slowdown in the economy will eventually have a domino effect throughout all areas of society. In Brampton, the 2008-2010 recession resulted in a lot of small and mid-sized business closures. Consequently a lot of people lost their jobs and many of them took a long time to find new ones. Most of those people have had to settle for less money than they were making before.

Today, the effects of this economic slowdown are still being felt by contractors and tradespeople who used to make a good living doing building and renovation work for people who had good paying jobs. A lot of that work has dried up and a lot of competition has entered the market as people who used to have jobs, found themselves out of work and looked to taking up self-employment to make ends meet.

Prices drop as competition heats up and long established businesses find themselves under heavy pressure from upstart independents who will take jobs at much lower prices; often working through the “no tax, cash grey market”. Margins get thin, profit drops and credit gets used to make up the shortfall in the hopes that the “good times” will soon return.

One Couple’s Story

At my Brampton office I meet with a lot of self-employed people who are facing a similar scenario to the one above. One couple in particular comes to mind. They had operated a sole proprietor contracting business for many years and had done very well providing a beautiful home, private schooling and all the best of everything for their three children. They had saved for the future and had a good amount of RRSPs set aside.

Then the Recession hit and business slumped and never recovered. They carried on confident that things would improve, the economy would bounce back just like it always had before.

But this time was different – the job losses deeper, the business closures more widespread and opportunities for work were just not coming back. People who had scheduled work with them canceled and some of their clients could not pay. Their savings disappeared and instead of cruising on their hard work, every day became a struggle to find profitable work and make ends meet.

To address the shortfalls, they cashed in tens of thousands in RRSPs, triggering a tax problem that would sap the cash flow of the business. They borrowed on credit cards to make it through. By the time they came to see me, they had 100 thousand dollars in credit card debt and owed nearly 50 thousand in income tax debt. They had more money going out than coming in and everything was starting to fall apart.

The Decision To Reach Out To A Trustee

It took a lot of sleepless nights to decide to come see me. They feared what a “bankruptcy trustee” might do to them; would they lose their home, their cars, everything?

We talked about a plan.

They owned a large home – purchased and supported by an income that no longer existed – that was going to have to go, but there was a good amount of equity and even a fast sale would probably yield most of the money that would be needed to solve their debt problem.

Between the proceeds of the home sale offered as a lump sum and a manageable monthly payment all under a joint consumer proposal, a plan to get them debt free emerged.

Their business was still viable; it just did not produce what it once did. But under their new downsized financial plan they could still live quite comfortably. They were able to manage the transition to debt free living all on their terms and in a way that kept them in control every step of the way. Certainly it was not the outcome that they had hoped, but it was one that enabled them to keep what was important and move forward to rebuild their business to the level it had been before.

Often it takes the help of an outside advisor to help you find the path to debt freedom. Contact a licensed insolvency trustee for clear, helpful advice about how to deal with your debt and rebuild your future.