informal proposal by relative to credit card companies
January 21st, 2009 by Questions
My brother is mentally ill and is now on disability for his psychiatric condition. His wife has met with a trustee and depending on the appraisal of their home (on which they have a second mortage) they may be able to make a consumer proposal or given the reduced income may have to file bankrupcty. I am in a position to pay off a portion of their credit card debt in an attempt to keep the children in their home. If I were to phone the credit card companies with an offer and one was to accept but others wouldn`t, how might this jeopardize their chances at a consumer proposal?
Posted from: Manitoba
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January 22, 2009 at 8:53 am, A licensed trustee said:
There is no law or rule stopping a person from paying off someone else’s debts. If a relative decides to pay off some of the debts, well that’s just lucky for those creditors.
If the Court thinks that the debtors actually paid off the debts themselves then that CAN create problems (it’s called a preference) so make sure the money can be traced and is paid directly by the relative.
Having said all of that, it is likely a more helpful thing for the relative to offer the house equity as a lumpsum to start (or as the entire amount to be paid) in a proposal. That way the family gets the most bang for your bucks… If you speak to a local trustee they will explain to you what I am suggesting.