Avoiding preferential treatment of creditors
December 7th, 2011 by Questions
Because various financial institutions set their monthly minimum credit card / line of credit payments differently, how can I ensure that I am not accused of favoring when paying one creditor over another? For accounts with similar balances owing, one company would ask a minimum payment of $50 (interest + $10) while another would require a minimum of $350 (2% outstanding). Would paying the minimum balance to all creditors be fair?
I currently still make use of one credit card but will not be using it beyond this year. Should I be paying the full balance (about $2.6k) or should I start only paying the minimum required in line with what I pay the other creditors? I will be filing for consumer proposal in January/February (as I need to still file my 2010 tax return)
For a creditor who isn’t a financial institution, what would be considered preferential treatment? If I owe a friend $45,000 and have not made any principal/interest payments yet as the terms of repayment was rather flexible, will paying her $3k this month or next, prior to filing a consumer proposal (in Jan/Feb) be challenged by the other creditors?
I don’t want to make it harder for any creditor to accept my proposal
Posted from: Ontario
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December 07, 2011 at 4:18 pm, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:
If you know you are going to be filing a consumer proposal in the next month or so the best advice is to stop using any of your credit cards and stop making any payments to your creditors. There is no point if you know that the debts will simply be part of the proposal.
Now the more significant issue is that of an potential preferential payments. You don’t need to worry about minimum payments to credit cards being challenged. But there would definitely be a concern if you paid $3,000 to your friend shortly before filing a proposal. If you simply stop making payments and stop using credit, then you shouldn’t have to worry.