Should we have used extra pay for our consumer proposal?

What is looked at as far as $ received but not paid on the debt? My husband received a termination pay which we used for some debts, home repairs & a vacation. Will it count against us in a consumer proposal that we didn’t pay off debts? Also recently put a 2nd mortgage on our home from which we paid existing mortgage, utility arrears and replaced a broken down car needed to get to work. Husband paid off his credit card with termination pay but it was charged up again. Will creditors look at these kinds of things?

Posted from: Ontario

One Response to “Should we have used extra pay for our consumer proposal?”

Doug Stuive, CA | Trustee | CIRP said...

As part of the application process your Trustee will ask you to disclose any large sums of money received in the period leading up to the date of bankruptcy and to include details as to how the funds were spent. This information is then recorded on your bankruptcy documents and will be sent to your creditors.

Just because you must disclose this information on your bankruptcy documents does not mean that there will be negative consequences. Often times your explanation of how the funds were spent is enough to satisfy creditors that there was no egregious misuse of the funds received.

In some cases a creditor may request additional information about how the funds were spent and then may decide to oppose your discharge from bankruptcy. If that happens then a court hearing is scheduled and the creditor would attempt to convince the Court that because of the way you received and spent this money you should not be entitled to an Absolute Discharge. This does not happen frequently but is a possibility.

I would recommend that you discuss your situation with a licensed trustee. A trustee can provide you with a better opinion as to the likelihood that you may run into difficulty once they are provided with more detailed information about the timing and quantity of the funds received. In most cases these types of disclosures do not result in any issues with your eligibility to receive an automatic discharge from your Trustee’s office.