What happens if I have not treated my creditors equally?

In my last entry I discussed the importance of treating all creditors equally prior to filing a bankruptcy or proposal when making payments to them. The Bankruptcy and Insolvency Act is designed to be an open and transparent process where all creditors are treated equally before and after the bankruptcy or proposal process has started.

When you file for bankruptcy or a proposal you will be asked if you made excess payments to any of your creditors. This is asking if you paid one of your creditors more money than the others (more than the minimum payments) or if you paid one of them and ignored the rest of them. This is called preferring a creditor and means you have not treated your creditors equally.

If you have done this, depending on whom you paid, the trustee can contact that creditor and request that the funds be returned or in some situations request that you pay that same amount of monies into the bankruptcy or proposal. Depending on the creditor paid, the trustee can go back up to one year to retrieve the payments.

If you are experiencing difficulties in paying all your creditors or are starting to use funds from one creditor to pay another, please e-mail us or call us at 310-PLAN to discuss your situation.

Posted by Norma Yau, Trustee @ 5:45 PM

<< Hoyes Michalos and Associates Ontario Personal Bankruptcy Blog