I recently was accepted for a CPP disability pension. They gave me a cheque for 20,000 dating back to Sept. 2004 with future monthly payments of 1032. My private Long Term Disability payments will now be reduced by the appropriate monthly amount of 1032 dollars (from 1400/month to 368 per month). I now owe the private insurance company the backpay that I received.
Questions: I am facing certain bankruptcy in the near future. If I pay this full amount to the private insurance company does this constitute showing favourtism to one creditor over another? Should I split this 20,000 equally amongst my creditors?
If I split the funds equally where do I stand with the balance owing to the private insurance company when I go bankrupt? Can they hold off future payments until debt is retired or must they continue paying what they now owe on a monthly basis (368/month)?