Retaining Untapped Credit
August 4th, 2008 by Questions
I currently have close to $75,000 in debt consisting of lines of credit and credit cards, along with some student loans. I also have a line of credit and a credit card that I presently do not owe ANY money on. I am considering filing a proposal.
My questions is this: can I keep the credit lines that have a zero balance post-consumer proposal?
There is no reason I can think of for them to be listed on the proposal as there is a zero balance on them. There would also be no reason to advise the lenders of my consumer proposal status. My research has lead me to believe that there should not be any problem retaining them. Obviously this would be very useful in rebuilding my credit history post-proposal.
Posted from: Alberta
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August 05, 2008 at 8:31 am, A licensed trustee said:
I am sorry, but you will not be able to retain your unused line of credit or credit card. Your are correct that there is likely no reason to include them on the list of creditors that is mailed out, but they will be notified and presumably your access to the credit canceled.
There are two very good reasons for doing this:
1) if your finances remain tight after filing your proposal you may be tempted to use teh line of credit or credit card in an inappropriate manner (like taking a cash advance to make your proposal payment); and
2) your agreement with the bank (or finance company) that issued teh line of credit and credit card stipulates that you will notify them if you declare your self to be insolvent. If after you inform the lender that you’ve filed a proposal they decide to allow you access to your line of credit and credit card then things will be on the “up and up” – if you continue to use them without receiving new approval you are likely guilty of fraud and/or misrepresentation.
Sorry, but if you decide to file a proposal or bankruptcy you lose access to allof your unsecured credit – even if you haven’t used it yet…