Meeting with the Bankruptcy Trustee

**Daisygirl** · 01-06-2011, 05:42 PM

I had my meeting with the bankruptcy trustee yesterday and have been mulling things over..

Other pertinent information: When I got divorced I was involved in a bankruptcy from our business when it dissolved. So this would count as a second strike for me.

I have two options.

2.) Bankruptcy: For the next 3 years, every dime I make over $2300 a month would go to the courts to disperse towards my lenders, including the house, car, etc. This put my credit at r9, which I really could care less about - I've found cash only is a delightful way to live. Furthermore, no tax returns, no child tax benefit, nothing would be allowed to be paid to me - it all goes right to the courts. After 3 years, there would be a hearing and a judge would decide if the payments went on another 3 years or if they bankruptcy would be discharged.

2.) Consumer Proposal: A certain amount of money would be offered as a monthly payment for the next 5 years. The number we came up with was $400 a month. That money would be dispersed among the lenders for the next 5 years and could be paid off early at any time. Additional money made (for example, a raise, a tax return, etc) would be allowed to be kept, but a record of spending has to be given to the trustee once a month for the first 6 months, every 3 months, then every 6 months, for the time of the proposal. They expect to see savings, accounts set up, etc., for any type of spending required, such as a fund for tuition for my daughter, a fund for sports for another child, a fund for the car, etc. They can't mandate amounts - they can just bug you about it. With this my credit would be an r7 - still so deep in the toilet as to be residing in the sewer system.

I'm definitely leaning towards option 2 as it seems a more viable way to build a new financial life, while still satisfying some debt voluntarily. As I've written, I feel horrible about the situation I've gottn myself into and I want to take steps towards doing what I can to make things right - or right-er.

When we did the calculations, if my income remains the same as it is now, the amounts paid back would be similar, with the Option 2 payback being slightly higher but more affordable.

OTHER INFORMATION

There is no interest charged for either option.
The payments to the trustee for her services comes from payments made to the courts.
The creditors are not allowed to contact me or take any further actions against me, in either situation.

What do you all think of this? Has anyone had this experience?

PS: If I ever try to borrow money to start another business please kick me sharply in the BUTT.

**Grayce** · 01-07-2011, 03:50 AM

I had a friend that went through a consumer proposal and she said if she had to do it again she would have went for the bankruptcy. She picked the proposal because she wanted to pay off her debt, with a bankruptcy, much less is actually paid off.
Both of these stay on your credit report for so many years after it is discharged. Because the consumer proposal is for a longer period of time, it stays on your credit report for longer. Also you do not have the option to begin re-building your credit until the proposal is completed. She took out a loan (with a co-signer) part way through the proposal, thinking it would help her credit. It wasn't until later that she found out that it wouldn't count at all. She managed to hang onto her house because of the proposal, but when her mortgage came up for renewal she was unable to get another mortgage.
She went on maternity leave twice during her proposal, she was able to suspend her payments for a year each time. This stretched her proposal out for 7 years.

**monkeywrangler71** · 01-07-2011, 08:18 AM

I'm glad you've gotten in to speak to a trustee. I know you're having a rough time, but there must be at least some small relief in knowing exactly what your options are.

When you say the amounts paid back are similar, do you mean the payments are the same or the total paid over three years would be the same as the total paid over five years? What did the trustee advise would be your best option? Do both options still mean foreclosure, or can you make arrangements to keep the house if you do a proposal?

**Daisygirl** · 01-07-2011, 07:23 PM

Monkeywrangler:

The trustee recommends the proposal because it's a set amount and I can still benefit from future raises, etc. There is also a chance with the bankruptcy that I could go to court in 3 years and the judge have me continue payments for another 3 years. The proposal is a legal and binding agreement for a set amount between the creditors and me.

I'm so far behind on the house and property taxes that there is no possible way to keep it. I'm okay with that - I'm settled nicely in my apartment and my smaller, more subdued lifestyle. I just want to get past this, do what I can to make it right, and not be afraid to answer the phone again.

**monkeywrangler71** · 01-07-2011, 09:44 PM

Another thing to consider, I'm not sure when you went back to work but if your income in 2010 was lower than 2009 there would be an increase in your CTB in July. If they would take that away with the bankruptcy you'll want to take that into account.

**dcompton** · 01-08-2011, 01:54 AM

Daisygirl, I don't know anything about the legalities to advise you, but I wanted to tell you that I am really glad you are getting all this lined out. Your life will be so much more peaceful once the horror of the creditors' abusive calls stops that whichever of these two difficult options you choose - it will be worth it.

Like the rest of the Village, I'm thinking of you and hoping that this can come to some resolution soon.

**Daisygirl** · 01-09-2011, 12:15 PM

I've decided to go with the proposal.

I want to be able to save money again and budget, and this seems like a more honorable way to deal with my financial issues.

Thank you for your input, my friends.

**Nana2two** · 01-09-2011, 01:20 PM

Number 2 sounds the best. Because what i was told when you have a high amount like in number 1 your screwed if you would lose a job or something would happen to where you would have to pay such a high amount back.About 5 years ago we had to file we had $80k in medical plus another $20k in credit cards that we used for meds and some medical.Since we don't have a set income. We own our own In home business they could not take our Business away because it's in our home and we reinstated our home loan. Our car was payed off and worth less then $4k. We had a great attorney because he said going with a set amount we would be screwed because if we missed 1 payment it could cause the creditors to cancel out our aggrement. He suggested filing for straight bankruptcy. So we did. We were not proud of it but we had to. Our income goes up and down so much. One month we could make $2300 and next month $4000 we also now have insurance. We pay $170 a month for health insurance and have 70/30 and since we are self employed and making less then $50k a year we can get help from the state that covers 20% of the 30 that we have to pay. I hope you make the right choice is so different for every one. Hugs to you.

**Daisygirl** · 01-14-2011, 01:26 PM

Today was meeting two with the trustee.

I filled out all the reams of paperwork with amounts and account numbers. I feel really positive about taking this step to get all my debts in one place with no interest.

After my meeting I went and opened a new bank account at an institution to whom I owe no money. I've already had one account siezed, so the last thing I want is for that to happen again. The branch I went to was sunny and pleasant and I felt really good about making a new start.

My proposal will start on Jan 31 if the majority of my creditors agree to it. Fingers crossed that they do, or my options are down to bankruptcy or living incognito and hoping no one ever finds me. I have a major case of nerves going on right now.

Please pray that the creditors accept my proposal.

**frugalfriend** · 01-14-2011, 02:14 PM

I'm praying for you! I really think you're doing the right thing with choosing the consumer proposal. Keep us posted and know that we are here for you.

**mek42** · 01-16-2011, 08:30 PM

I hope everything goes well.

**Anna43** · 01-18-2011, 11:21 PM

I don't know how bankruptcy works in Canada, but in the U.S. you can file a Chapter 13 which sounds similar to what you're talking about. The other option is Chapter 7 which washes away the unsecured debt and you do not repay anything. Do you have a Chapter 7 type option? Do you work 100% with a Trustee or do you have an attorney representing you? I hope it all works out for you.

I prepare bankruptcies so I work daily with people in major financial stress which I truly believe is damaging to both physical and mental health so I understand your desire to get things straightened around.