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Consumer Proposal Default

We recently file a divison 1 consumer proposal and it was accepted by our creditors. Looking at our current financial situation, we are almost certain we will not be able to make all of our scheduled payments. This will put us in default status. Having spoken to a financial planner, he suggested we get a second opinion on our current proposal and consider filing for bankruptcy. In his opinion, banks see consumer proposals the same as bankruptcies anyway.

Should we seek a second opinion at this point?

Posted from: Ontario

One Response to “Consumer Proposal Default”

Barton Goth – Goth & Company Inc. -Trustee in Bankruptcy said...

I am not sure where you would get a second opinion, but it never hurts.

As for whether the banks look at a consumer proposal differently than a bankruptcy, they do. The fact of the matter is you have a reduced impact on your credit as a result of filing a proposal and in the future, after your credit is rebuilt you don’t have to mark off on credit applications that you have previously filed for bankruptcy.

Now the bank will treat you differently than someone with a perfect credit history, and that is to be expected, but usually their reaction is not as severe as if a bankruptcy was filed.

As for the default status, if you default on your Division I Proposal you will be automatically placed into bankruptcy, so there is no need to separately file for bankruptcy, just stop making your payments and you will find yourself in bankruptcy.