GTA Housing Disaster Episode 33

multiple investment properties, multiple owners, co cashflow

Scenario:

self-employed restaurant owner, GTA, single

at one point owned 5 condos including his own primary residence –- 4 investment units; most had co-signors and various equity % partner arrangements, mostly minor %; he was the mastermind (there always is one: as I discuss with Ron Butler on his podcast recently; and the mastermind isn’t often the one with the real money)

business started losing money 2018/19, then COVID; shut it down early 2021

sold off 4 condos in 2023/23

lost money on 3 ($170,000 total), made $200,000 on one that was bought much earlier; used this to repay family that helped him fund his business primary residence

Primary residence:

- in an area with big price drops

- value is now down to $580,000; he owes $730,000 (1st from a big 5 bank, then 3 privates)

he was behind 3+ months on his primary residence private mortgages (was current on the main one, of course); one private took action; issued notice to enforce security, condo sold power of sale; he moved in with his brother

he is now working on payroll as a chef, $4,700/mo net

Total UNS debt:

owed CEBA loan from COVID but his corporation closed so he is personally clear from that $60k corp obligation

owes $40,000 HST from biz; no other business debt (was all funded by family)

$25,000 in CC debt

- $179,000 shortfalls on private mortgages after cost of sales taken out

total: $244,000 UNS

Result: filed a consumer proposal

offered $57,000 ($950 x 60 months)

private mortgage lenders made up the majority creditors in aggregate

creditors counteroffered $1,400 x 60 due to sale of condos in 2023 (disclosed as part of the filing); = CP $84,000 instead of $57,000; creditors would not negotiate to meet halfway; he felt he couldn’t cashflow that monthly amount (he couldn’t), so he decided to just file a surplus income personal bankruptcy instead; approx. $23,000 total (on total debt of $244,000)

The only risk is the creditors oppose his discharge due to the sale of condo proceeds being within 5 years of filing date judge could order a conditional discharge, making him pay a suitable amount to satisfy creditors due to the preference made to family members (in 2023) under s. 95 of the BIA.