If you have recently taken out loans, can you still file a CP?
Posted on January 11th, 2010
Question: I’m just curious if there is a time frame between getting new credit and filing a proposal. For instance, if you got some furniture on a no interest, no payment deal and then 3 months later the situation changed so that filing a consumer proposal is your best option?
We have an excellent credit score and have had no problem obtaining credit, including the above described furniture financing, however recently our situation has changed. Reviewing the situation our debt has been increasing steadily and just lately we have been relying on overdrafts and credit cards to meet our obligations. This month everything is late except for the mortgage and car payment, and the situation is not getting better, so a consumer proposal may be our option – but how are recent loans viewed?
Answer: Recent loans are not viewed favorably by the creditors. Obviously if you used your credit card to buy a $5,000 big screen TV on Monday, and then filed a consumer proposal on Tuesday, the credit card company would be very upset. They would assume you had committed fraud: you knew you were in financial trouble, and you used your credit card anyway, knowing you would never be able to repay it.
The longer the time that passes between the purchase and the filing of the consumer proposal, the less likely the creditor will object.
All purchases within the three months prior to the filing are automatically reviewed by the creditor, since they are required to provide that list to the trustee. However, even transactions over a longer period can be reviewed.
The real issue is whether or not you were insolvent (unable to pay your bills) when you made the purchase. If four months ago you were still working, and paying all of your bills on time, and you bought some furniture, it may not be an issue. If you were unemployed at the time, it may be an issue.
The amount of money involved will also impact your case. A $50 purchase probably won’t be an issue; a $5,000 purchase, if your total debts are $10,000, could be a serious issue.
Each case is different, so we suggest you contact a consumer proposal administrator to review your situation and advise you on the likely outcome of your filing a consumer proposal.
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- What can you do if you’re drowning in debt?
- Can you Negotiate Different Payment Terms with your Creditor?
- Get Helpful Information About Options To Consider When You Are In Debt Inside This Post.
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