consumer proposal,  credit cards

Can you keep a credit card when filing a consumer proposal?

I have a personal AMEX and a Visa I use for paying services I need for my consulting business (how I’m able to make money at the moment).

What’s the likely hood I’ll be able to keep cards assuming I have no balance at the time of the proposal?

My debts come from personal guarantees I had made for a Corp that got loans, that business failed and I’m on the hook for whatever the lenders decide to do (I’m ready for the worst tbh).

My trustee handling the business bankruptcy has been helpful, but I’m asking PFC to see if anyone from my side who’s dealt with this before might have experienced from the personal side through a consumer Proposal that I’ll try to file(?) with support of a trustee when it comes down to it

From what I understand it’s somewhat up the the lending institution who issued the card (diff bank for Visa from Corp and AMEX).

The cards have no balance other than one which I’ll pay off before the proposal – there’s a few web services I’m subscribed that allows me to make some money to pay into a proposal, not sure how else to pay for this without asking a family member who I could reimburse…

I’m trying to avoid bankruptcy altogether with a payment plan, but that’s not gonna be clear for another month I’m guessing.

Anyways, hoping to get some insight. I’ve done what I can to have as little outside of the business borne debt on my file, any feedback is most appreciated.

Victor Fong, Licensed Insolvency Trustee replies:

The Bankruptcy and Insolvency Act, more specifically Directive 3 states that you’re required to deliver to the LIT your credit cards if you’re filing a bankruptcy.

It’s silent on a consumer proposal situation.

Some LITs will allow you to keep cards with a zero balance and others will not. The latter situation arises when the LIT interprets Directive 3 as being applicable to both bankruptcy proceedings and CPs.

Suppose you work with an LIT who takes the former position.

Practically speaking, if a credit card has a zero balance on it (let’s say it’s an Amex card) Amex wouldn’t be a creditor and hence wouldn’t be notified that you filed a CP.

It’s only upon performing a credit search that Amex would be made aware that you filed a CP and they’d only be able to conduct one if you gave them permission to do so – for example, upon your application for an increase in your credit limit.

So if you work with an LIT who’ll let you keep the Amex card because it has a zero balance, you shouldn’t run into any problems until Amex needs to run a credit check on you. And I can’t see a situation where they’d do that unless you ask for a credit limit increase.

Victor is the President of Fong and Partners Inc. He is a Licensed Insolvency Trustee and Chartered Professional Accountant. With many years of experience in the insolvency field, Victor has been involved in both corporate and consumer insolvency engagements. Previously with a large national firm, Victor founded Fong and Partners Inc. so that he could dedicate his professional life to help people from all walks of life to deal with their debt.