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CP: Debt to Family

If I include a family debt in a consumer proposal, will family have voting power / receive partial payment of the debt the same as any other creditor would? I have been reading here that family debt can be included in a CP or BK but nowhere does it explain how that creditor fits in with the rest of the gang of creditors.

Would this not open the whole bankruptcy / CP thing up to a hellofalot of fraud? i.e.. “Yes, I owe my FAMILYMEMBERX $50,000 and another $20K divided amongst 3 other creditors – so my family member has the most voting power if I were to file a proposal” … not to mention the actual legitimacy of the family members debt…

Posted from: Nova Scotia

One Response to “CP: Debt to Family”

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

Family debt should be included as you have a legal obligation to list everyone. But the unique thing about related creditors is they are only allowed to vote against a proposal not for. So in most instances people’s family don’t vote.

Now in terms of dividends, the creditors are a normal unsecured creditor and participate in distributions just like everyone else. But the key is the family member has to have verifiable proof of the debt (i.e. sworn affidavit, copies of bank statments showing the original transaction, potentially copies of an agreement), so the actual legitimacy has to be demonstrated.