Car lease & cosumer proposal

April 22nd, 2009 by Questions

Hi and thank you for your wonderful, informative site. I was hoping you could provide some insight into my situation.

I have a car lease thru Toyota Credit Canada. Due to a couple of accidents I was involved in, my insurance has been cancelled eff. May 15th, and my only option thru Facility would cost $10,630/yr or ~$885/mo. Even if I made an effort to afford the monthly payments, I would have to finance one year`s worth of premium and due to my credit score and current debt level, I could only qualify for high rates. I`ve had no luck transferring my lease to someone and Toyota wants to charge me $6500 to exit my lease (there`s 13K left on the lease.) I`m not in a position to pay the $6.5K. I am considering simply taking the car back to the dealer, but I know this will have a negative effect on my credit. Any idea for how long? Since I need a car for my business, I was simply considering getting a rental car and paying for it and the insurance w/ my CC.

However, if I were to file for a consumer proposal or debt settlement prog, will I still have access to at least one CC?

In addition to the car lease, I have $17500 in unsecured debt on which I`ve been making just minimum payments and getting NOWHERE (debt is in fact increasing due to the high interest rates.)

I have no assets. I have been declined for a debt consolidation loan by RBC.

Since returning the car will negatively affect my credit, which is already bad (638 score) as I`m maxed out on my CCs, and considering my overall debt sit`n, I am considering a consumer proposal or debt settlement program.

1. Just to confirm: I should return the car *before* applying, right?
2. Will I still be able to keep a credit card?
3. Is there any reason why one would choose debt settlement over a consumer proposal? It seems the effect is the same on credit score, but debt settlement would cost more.

Sorry about the long-winded question. I very much appreciate any help.
Thank you!

Posted from: Ontario

Questions

One Response to “Car lease & cosumer proposal”


April 22, 2009 at 9:21 am, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:

I am glad to hear you have found our site helpful.

In terms of your questions. You are correct the car should be returned prior to filing the proposal or debt management program.

As for a credit card, in a proposal you are not able to keep a credit card. Now you may be able to arrange to retain one in debt management program, but you would have to confirm that with the credit counselling organization you would be dealing with.

In terms of reasons for the debt managementvs. the consumer proposal. You are correct, ultimately both have the same impact on your credit, but often in a proposal you can negotiate a reduction of what has to be paid so it is less expensive than the debt management program. The only time the debt management program is preferable is if you in a proposal you would have to pay your debts in full, then due to the way administration costs are charged the debt management program would likely be less expensive.

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