Dealing with a secured creditior during a proposal
I have recently filed a consumer proposal that was accepted by my creditors, this was 5 months ago. During this time, one of my listed debts (with a national computer company) holds a security interest in my computer (as I just found out). My trustee says they are a secured creditor and there is nothing they can do to help me. From my understanding, this debt would be partially secured because the amount owing is far less than what the computer is worth. I have contacted the company and they said they are awaiting word from the trustee that they have no interest in the computer before they can make an arrangement with me. They basically said they wanted me to honor the rest of the contract and pay the total debt owing. This is not realistic to me. I am trying to move on but this is hanging over my head. Is there a time limit this creditor can come back and expect payment or does this continue until they feel the need to deal with it? Every time I phone to try to negotiate a payment schedule I am bounced around with no end in sight.
I would suggest you discuss this with your trustee again. Your trustee (in this case your proposal administrator) should explain in more detail how this process works.
In general, there are three ways to deal with a secured creditor in a consumer proposal or a bankruptcy. (A secured creditor is a creditor that has registered a lien on one of your assets, such as a car, a house, or household goods like a computer)
First, you can surrender the asset. Once the asset is returned to the creditor, they become an unsecured creditor, and participate in the proposal for whatever shortfall exists, just like all other creditors.
Second, if the creditor agrees, you can continue to make your normal monthly payments until it is paid in full. This option only makes sense where you want to keep the asset, and the future payments are approximately equal to the value of the asset (so don’t offer to pay $10,000 in payments for a $2,000 asset).
Third, you can negotiate alternate arrangements with the creditor. For example, if the asset is worth $2,000, you could offer to pay $2,000 over time. It will be up to the creditor to decide whether or not they accept this deal.
In most cases the correct answer is to offer to surrender the asset. Advise the creditor when they can come to pick it up. If they don’t come to get it, that probably means they don’t want it, in which case you can probably keep it. This must be done in a commercially reasonable manner, but in general if the situation has been going on for five months, it would appear the creditor does not want the asset.
In my experience due to rapid changes in technology a used computer has virtually no value, so they would rarely come to pick it up.
Again, I suggest you discuss this with your trustee, since my answer is a general answer only, and only your trustee has all of the facts in your situation.