Can an unsecured debt consolidation loan be excluded from consumer proposal?
My husband and I are considering filing a consumer proposal. We have a mortgage, a car loan, an unsecured debt consolidation loan that my parents co-signed on, and several credit cards.
We can manage our mortgage, car loan, and consolidation loan, but are getting further and further into credit card debt. Is there a way to file so that the unsecured debt consolidation loan is excluded from the consumer proposal, thus leaving us to continue paying it as we have been and avoiding the debt being turned over to my parents?
Posted from: Ontario
The reason your parents had to cosign the loan is because the lender did not think that you were a good risk. As such any default or compromise of the debt will no doubt result in a demand being made to your parents and they will thus assume the responsibility for paying the debt. If they are going to be faced with this financial burden in any event they may wish to directly assume the debt. If you wish to file a proposal at that point your parents, as creditors, would be entitled to a proportionate share of the distribution. As a related party their votes cannot be counted towards the necessary majority to accept the proposal. However, if the proposal is accepted by the required percentage of the rest of the creditors they can participate in the distribution to creditors. Once the proposal is completed, you will no longer be legally liable for these debts (There are some exceptions) this will include the legal liability to your parents as creditors. If, after the completion of the proposal you feel that there is a moral or ethical obligation to your parents, you will be free to deal with that as you see fit.