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January 2012 - Maximizing your credit limit prior to filing consumer proposal or bankruptcy would put you in a legal bind.

Maximizing your credit limit prior to filing consumer proposal or bankruptcy would put you in a legal bind.

☳ by Adam Aspilla

People who are in financial difficulties, their last resort are either file consumer proposal or bankruptcy depending on their income, assets and liabilities.

 

In my more than 20 years of helping people solve their financial problems, a question commonly ask is, "Can I max-out my credit cards and or line of credit before filing consumer proposal/bankruptcy?"

The answer to that question is yes, however, creditors may oppose to their proposal or bankruptcy on the ground of bad faith or even fraud.

 

It is bad faith or fraud for you already plan to file a consumer proposal or a bankruptcy and therefore you have no intention to pay your creditors on the amount you took from your credit cards and or your line of credits.

 

Once your creditors know of the fact that you took funds from your credit cards and or line of credits within ninety days (unless there was a changed made lately) from the filing of consumer proposal or bankruptcy, creditors would oppose on your proposal and bankruptcy.

Even if you do not max-out your credit cards or line of credits for as long as you took out money within the time above mentioned prior to consumer proposal or bankruptcy, your creditors have the right to oppose.

Aside from opposing your proposal or bankruptcy your creditors have the option of filing a criminal charge of fraud against you.

 

Consumer Proposal or bankruptcy is designed to help consumers who are in financial difficulties to start their life again free from pressure or harassment from creditors.

When a person files a proposal or a bankruptcy it would adversely affect the profitability of credit grantors, and therefore the law also provides rights to creditors to protect them from consumers who would abuse the system.

 

If your intention is to be free from your debts that you can no longer handle and start fresh, file a consumer proposal or bankruptcy without taking any money from your credit cards or line of credits that violates the law above mentioned. Otherwise, you are solving a problem and creating another one or your problem becomes two instead of only one.

 

 

Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.