Division I proposal and unanticipated problems.

April 10th, 2007 by Questions

If I make a Division I proposal which is accepted and many months later I run into problems which temporarily reduces my income , do I get any leeway with the payments? Or will I be forced into bankruptcy for the original amount plus interest?

Example: I make a proposal to pay 1000 dollars a month for 5 years to settle a debt of 100,000 dollars. 3 years later I have a heart attack and can\’t work for 3 months and also have higher medical expenses. I stop paying the trustee.

Do I get ANY credit for the 36,000 dollars I have already paid? Or do I get hammered with the interest on 100,000 for the 3 years which leaves me deeper in the hole?

Are we taking a big risk by filing for a consumer proposal? Will it be better to bite the bullet and file for bankruptcy?


One Response to “Division I proposal and unanticipated problems.”

, Barton Goth GCO Bankruptcy Trustees said:

First, I want to clarify whether or not you are talking about a Division I proposal or a Consumer proposal, you referenced both and the type of proposal will make a fairly significant difference when answering this questions.

Now if we are dealing with a Division I proposal the answer partially depends on what terms were included with the proposal. Normally there isn’t any leeway with the payments and an automatic bankruptcy would occur if the terms were not met.

However, under unique situations (such as a heart attack), it may be able to apply to either contact the court or your creditors and have them agree to an amendment of the proposal (although there is a relatively aggressive time frame that must be followed to do so).

Realistically, a proposal (either consumer of division I) is a good mechanism to deal with overwhelming debts without having to file for bankruptcy. With the proposal you are correct there are some unforeseen circumstances that can cause it to go sideways, but that can happen in a bankruptcy as well.

The best thing to do is contact a licensed trustee in your area, outline some of these concerns that you are having and they will help you to understand exactly what terms will be placed into the proposal and which solution will be the best given your situation, but don’t panic to much about what could potentially happen in the future, all we can do is make the best decision given today’s situation and expectations for tomorrow.

Barton K. Goth is a senior advisor with Goth & Company Inc. – Trustee in Bankruptcy. Goth & Company Inc. is an Edmonton based firm licensed by the Federal Government and committed to helping people find solutions to financial difficulties. For more information about bankruptcy or the various alternatives available visit http://www.insolvency-trustee-edmonton.com/, post a question on their Edmonton Blog or contact Goth & Company Inc. directly.

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