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Consumer Proposal and Contingent Debts

My husband and I bought a restaurant. At this time our credit rating was excellent. We thought this business would be good for our retirement. Everything went wrong. Business dropped off dramatically we were in dire straights. We raised the line of credit on our house and cashed in all our RSPS to pay employees and keep the business going. Finally after a year all our credit cards were maxed out everywhere and our home equity line was higher than the value of the house. Now I am on a disability and my spouses income from is job is approximately 4000. a month.
The restaurant was taken over by the bank in November 2005. We had a government guaranteed loan through the bank.

We filed a consumer proposal on the advise of our trustee for our personal debts but in the list of creditors Revenue Canada and the bank are listed under contingent debts. What if when we eventually find out exactly how much they claim, our debts add up to more than 75,000.for each of us. We want out of this mess the quickest possible way. We are both 59 years old.

One Response to “Consumer Proposal and Contingent Debts”

Barton Goth, GCO Inc. Bankruptcy Trustees said...

You don’t need to be terribly concerned, if the CRA debt is proven to be greater than $75,000 your trustee has to notify the creditors and the court that you technically don’t qualify to file a consumer proposal, but if neither of those parties takes issue to this it can remain as is. If either party takes exception they may require the trustee to amend the proposal to what is called a division one proposal. This is similar to a consumer proposal except it is made to be applicable for higher levels of debt. There are some slight differences, (i.e. a shorter timeline for voting, requires a higher degree of support from the creditors, and if you default on this type of proposal you are automatically in bankruptcy). I suggest that you contact your trustee so that he can explain this process in more detail, but realistically I don’t see much need for you to be concerned.