The Situation
The clients, a retired couple in Alberta, had both worked all their lives and retired in 2019. Through COVID, family members lost their jobs and the couple lent them money while borrowing was cheap, expecting to be repaid as things recovered; one client's parent also fell ill with medical costs the parent could not cover. The pandemic dragged on, the repayments did not arrive, and two secured lines of credit on the house, about $160,000 together, plus ten other credit accounts carried the shortfall. In April 2023 one client went back to full-time work to put the household on a stable footing again.
The Challenge
By the time they asked for help, five accounts totalling roughly $91,000 had been written off by the banks, there were active collections on the credit file, and the scores stood at 522 and 567. Open collections and written-off balances close the bank door, and the alternative lenders are not far behind; a retired couple with pension income and one new job does not fit a lender's picture of a borrower who will recover. The house, a detached home worth about $450,000, held the equity to fix all of it.
The Solution
We placed a private mortgage of about $305,000, roughly 68% of the home's value, on a one-year term at about 8% in 2023, with a 30-year amortization, and documented the income a lender would discount: the new full-time salary, two Canada Pension Plan and two Old Age Security entitlements, a small company pension and a U.S. Social Security benefit converted at the Bank of Canada rate, so the payment sat at a 39% debt-service ratio. The proceeds, about $290,000 in all, paid out the two secured lines, paid every written-off account and collection in full, closed the high-balance cards, and paid two accounts to zero while keeping them open so the credit file would have active trade lines to rebuild on.
The Outcome
One payment, zero collections, zero written-off balances, and a credit file that can now recover toward a bank or alternative refinance when the term ends. Helping family through a crisis is not a mistake a lender should punish for life, and a refinance like this is how a bruised-credit rescue starts: clear everything holding the score down, keep the home, and give the file a year to heal.