Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank

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francaisboots

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I apologize in advance for how long this post is. I feel very very stuck. Please help.

I have a scenario that I hope someone can help with. I have searched the internet inside out but I’m not really getting any headway.

We recently completed a construction mortgage in which we were very screwed over on. (VERY) Long story short, we had a $104,000 mortgage on small cabin on a piece of property. We were approved for a construction mortgage on a new house that we were going to build on the same property. The house was approved for $318,000 so we have a $254,000 mortgage. We were told by the financial representative to put everything on our credit cards until the first draw came through. What the bank completely left out was the fact that they would be taking the $104,000 from the mortgage on the little cabin out of our mortgage on our new house, which we didn’t find out until the first draw. We went to sign the papers at the lawyers to pay the bills, and there was hardly any money left over!! Therefore, we were building a $318,000 house on $150,000. As you can imagine, this was near possible. We somehow got through the entire process, however low and behold, at the end we are now faced with $97,000 in credit card bills. We managed to pay most of the contractors, but have about $10,000 owing to clue up with the plumber and another contractor, as well as approx. $10,000 owed to CRA. All around, we owe $117,000 that we don’t have. Given the fact that I have paid about $30,000 in interest in credit cards over the 14 month period, we would have come in nicely under our construction budget had this money not have been taken without our knowledge. I have been in touch with the client center at our bank with a detailed 5 page letter of every date and incident that occurred (there was so much more than simply not being told that information, however that is the one that has impacted us the most). I was basically only apologized to and was told that my “feedback has been provided to the appropriate area.”

We are now in a very sticky situation. I can no longer make my monthly credit card payments now that we are making the mortgage payments, and frankly, my payments were not going anywhere anyways. I was putting $400 on a balance of $18,000 and then the interest payment of approximately $380 would immediately be applied to my card. I have not made my payments for the last 2 months and credit card companies are calling daily.

We have spoken to the Licensed Insolvency Trustee in our area and I felt great about doing a consumer proposal. However, right after feeling confident in our decision, the trustee realized that we would have to do a division 1 proposal as we have a rental property that puts our individual debt over $250,000. The possibility of being defaulted into bankruptcy is now too scary for me to commit to filing for a consumer proposal, because I know I would not be able to afford my surplus income payments.

This brings me to my major concern. If bankruptcy was my only option, and I couldn’t afford the surplus income payments, what happens?

I make $3452 per month. My husband makes around $1000 per month. Our salary being $4452 per month is well over the $2640 we would be allowed to make, for approx. a $906 payment. In a bankruptcy stand point, if we were to sell our house, the trustee has calculated that there would be $14,000 equity left in our home, for a $700 payment on top of the $906 surplus income payments. A total of $1606 per month.

Our basic living expenses now total $4334 a month. We never eat out, do fun things, or buy anything outside of groceries. I have cut absolutely everywhere where I could. I recently changed my house insurances to a place with a lower premium and taken our mortgage life insurances from the bank and went to a company with lower premiums. I need internet for work and we do not have cell phone service where we live, hence the house phone payment. There is approx. $100 left over “on paper” each month (This money is never seen as it goes to incidentals such as repairs, maintenance, etc.) Not to mention, we owe tax bills at the end of each year as my husband’s music income is cash and so is our rental income. So we technically will soon be having a monthly payment to CRA once set up, which will put our living expenses total above our income. My husband is always looking for a more stable job as well as me trying to earn extra money by selling things and babysitting, etc. to make up for the unexpected expenses that arise.
Both the rental property and our new house have brand new mortgages. There is zero equity in the rental property as there is also a secured line of credit attached to it. There is not one penny made each month as the rental income breaks even with the mortgage payment. We literally only own it as an investment that will hopefully pay off in the future. And these surplus income calculations are based on the fact that the rental income would not actually count as income given the fact that there is no profit being made. The trustee said it wouldn’t but you can never be too sure. If that were to count as income (as it does on a tax return despite the fact that there is no profit), we would obviously be looking at much larger numbers.

We have looked into selling our vehicles, but we both owe more on them than they are worth, and we live a 30km drive away (each way) from both our jobs. Not having a vehicle each is not doable if we plan to go to work.

So back to my major concern. If forced into bankruptcy, we are looking at a min $1606 monthly payment. I have ZERO money left over each month, I cannot possibly come up with any idea of how to make this payment. In reality, with a consumer proposal or other payment plan, both myself and my husband could get second jobs to help make the payment, but in this case, If we were to make more money, we would have to pay more money, and there is really no way to get ahead.

Please tell me there is an option for people who don’t qualify for a consumer proposal but can’t afford bankruptcy?? If we could apply for a regular consumer proposal, I would accept whatever the payment was and my husband and I would each obtain the second jobs and the payments would be made. But given the fact that our entire fate is put in the hands of someone who may leave the request on their desk past the 21 day period, forcing us into bankruptcy by not answering, is far too big of a risk for us.

I have read a lot about the wait it out option with the credit cards where you then make a deal with the collection agencies. I know that is a long and dragged out process but I’m starting to wonder if that is my only option. At least then I could try to make and save some extra money to put aside in a savings account to prepare for bankruptcy payments if forced that route in a few months. At this point, I no longer care about my credit rating (I haven’t had credit cards to use in 1.5 years now and have gotten used to living without them… we do not plan to get any new houses or vehicles for a long long time as we have already just done all that). However, I do want to make right and pay my bills. I have spoken to the creditors and they really couldn't help me because my cards are not yet 90 days past due, so I'm apparently unable to make a payment plan with them. I feel STUCK.

I am really hoping there are options for us. We had really wanted to start a family once our house was finished being built but that dream is far far out the window for as long as I can see.

I know we have gotten ourselves in a huge mess and I really don’t know what to do to get out of it. I want to pay my bills, but I don’t know how. I have never carried a credit card balance in my life nor have I ever missed a payment until now. We do not waste our money, we do not take vacations or buy new clothes or anything. I feel we are 100% in this position because of the information that the bank left out in order to get us to sign on to a construction mortgage. So if there is anything possible we could do to fight the banks for putting us in this situation that would also be great to know. However my google searches tell me you can’t win against banks in court, so I am almost writing that option off altogether.

Thank you for your time.

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TreeFrog

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #1 on: April 02, 2017, 11:26:02 PM »
Hi francaisboots,

I understand how stuck you feel. I had to make a Division I Proposal in 2011, back when the upper limit for a Consumer Proposal was $75,000. As a new homeowner it was particularly worrisome, but, like the majority of proposals, it was accepted.

It's a shame your bank has treated you so shabbily. I don't believe there is much point trying to go after them however.

I know you would prefer not to go bankrupt, and I sense that you need better advice than you've been getting. You can see as many Trustees as you like ... maybe lay out your story for another one or two?

I'm a bit confused by your calculation that if you sold your house and ended up with $14,000 in equity, you would then pay $700 more per month toward the bankruptcy. Would the $14,000 not simply be disbursed to your creditors?

Similar scenarios have happened to thousands of honest, hardworking, thrifty people like yourself anf your partner. Rest assured that this will all work out somehow, and you will move on. Perhaps seeing a different Trustee would be a help.

Take care and keep us posted!
~Wendy

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francaisboots

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #2 on: April 03, 2017, 07:08:43 AM »
Hi Wendy,
Thank you so much for responding.
Yes I guess the $700 per month would go toward the creditors. I'm not really sure since I found the trustee was not the most friendly and he didn't give much information other than we would have to pay $700 a month on top of the surplus income payments.
I would love to talk to another trustee however unfortunately, there is only one company that handles it in my province. I am still hoping to figure out a way to get a second opinion, especially since I don't understand how we don't qualify for the joint consumer proposal which would increase our limit to $500,000, solving having to take to route of a division 1.
The trustee has stated that due to some of the smaller debts (Capital One, CitiFinancial) and CRA, there is a very good chance it could go to bankruptcy. I know there is no way I can afford the surplus income payments. If I had an extra $1600 a month, I wouldn't be in this situation in the first place. How does one pay their mortgage or car or heat/light after such a huge chunk is taken out? And I am all about being a hard worker, but even if myself and my husband held 3 jobs each to try to make the payment, that does not put us ahead given "The more  you make, the more you pay." I feel so so stuck.
You are right I believe, in that there is no point to go after the banks. It is an extremely unfortunate situation in that they hold the upper hand.

Thank you for your reply. It's nice to know I'm not alone.

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TreeFrog

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #3 on: April 03, 2017, 12:08:32 PM »
Hi again,

Only a creditor with a majority of the "voting dollars" (for instance, one to whom you owed $51K out of a $100K total debt) could singlehandedly cause your proposal to be rejected. With CRA only owed a small fraction of your own total debt, it could only wield that influence if enough other creditors also rejected the proposal (i.e., if, combined together, they totaled more than 50% of the "voting dollars").

When a creditor does not vote, it is deemed as an acceptance, as far as I understand. It was in my case.

I am gathering you are in Quebec, and the regulations do differ there - but usually only in small ways. Hope this works out for you, and that your Trustee can give better explanations. What is your next step?

~Wendy

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undersc0re

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #4 on: April 03, 2017, 12:34:35 PM »
I found out how evil banks were when I asked for help for just a few months, when they see your in financial trouble its over, they don't help, not me anyhow. They fast track your foreclosure and you get the runaround etc...tell you to seek legal advice....blah blah blah. It was not fun, hopefully you get a real good trustee to guide you, make sure you fully understand everything and do your best to look after yourself by reading through information provided by the government and your trustee to make informed decisions catered to your specific situation, everyone has a different situation whether it be divorce and kids involved or age and job, or business and foreclosure etc....some people need a very experienced trustee who can help you through a complicated proposal etc.
Visit more than one trustee to help you feel a little more confident and trustworthy of your decision.

Goodluck!

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francaisboots

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #5 on: April 03, 2017, 07:43:02 PM »
Hi Wendy,
No, not in Quebec, and as far as I know the rules in my province is the same as elsewhere in Canada. However, the trustee did not give me much information and I do not "trust" the information provided to me by him thus far. I have called the Superintendent of Bankruptcy Canada office and they have an analyst calling me back in 2-5 business days to clarify the rules around a joint proposal.

And I absolutely wish that only 51% had to respond, but according to this trustee, in a division 1 proposal, everyone has to respond. So say all but capital one responds, around day 19-20 they can contact them to beg them to respond, but if they choose not to respond by day 21, it is an automatic no and defaulted in bankruptcy. If it were the way it is with regular consumer proposals, I would absolutely take the risk.

Since there is only one office in my location, I am not exactly able to speak to someone else as the trustee already sent an email explaining he was disappointed I was seeking alternative options as a hit came through to his office when I filled out a form online. Therefore, I am doing absolutely everything I can to find out all possible information so I have a stand when I do request a different trustee at that location.

So thank you again so much for your time, I really appreciate it.

Hi again,

Only a creditor with a majority of the "voting dollars" (for instance, one to whom you owed $51K out of a $100K total debt) could singlehandedly cause your proposal to be rejected. With CRA only owed a small fraction of your own total debt, it could only wield that influence if enough other creditors also rejected the proposal (i.e., if, combined together, they totaled more than 50% of the "voting dollars").

When a creditor does not vote, it is deemed as an acceptance, as far as I understand. It was in my case.

I am gathering you are in Quebec, and the regulations do differ there - but usually only in small ways. Hope this works out for you, and that your Trustee can give better explanations. What is your next step?

~Wendy
« Last Edit: April 03, 2017, 07:45:18 PM by francaisboots »

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francaisboots

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #6 on: April 03, 2017, 07:47:40 PM »
I found out how evil banks were when I asked for help for just a few months, when they see your in financial trouble its over, they don't help, not me anyhow. They fast track your foreclosure and you get the runaround etc...tell you to seek legal advice....blah blah blah. It was not fun, hopefully you get a real good trustee to guide you, make sure you fully understand everything and do your best to look after yourself by reading through information provided by the government and your trustee to make informed decisions catered to your specific situation, everyone has a different situation whether it be divorce and kids involved or age and job, or business and foreclosure etc....some people need a very experienced trustee who can help you through a complicated proposal etc.
Visit more than one trustee to help you feel a little more confident and trustworthy of your decision.

Goodluck!

You are so right, so far the banks are not willing to help one bit. I am trying to make a plan with them as I want to pay back my bills, but they're not working with me whatsoever. It is very upsetting.

I am hoping I will be able to have access to another trustee, however, that it not looking promising as there is only one office. I am going to get all the information I can though in case I do have a case to be eligible to file a joint proposal, which would be much less of a risk than a Division 1.

Thanks for your time.

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TreeFrog

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #7 on: April 04, 2017, 08:41:34 PM »
Hi francaisboots,

Sorry for thinking you were in Quebec. In "la belle province", almost all the Trustees belong to one big company, so I thought that might be your situation.

Certainly your Trustee does not sound exactly great! Especially since he or he chides you for simply seeking information.  :o

As far as what proportion of your creditors must vote yes (or vote at all)... it would be good to have an expert interpretation of the law. Perhaps when the person from the OSB calls you back, you could ask about this.

From what I understand, all unsecured creditors form one "class" of creditors (secured creditors, who have the option of being included in a Div. I proposal but who usually do not choose to file a claim, are another "class" if they do participate).

Within each "class", 50% in number of individual creditors, and 66.6% of "voting dollars," must vote yes in order for the proposal to be approved. Although this is more stringent than I was thinking, it does not look to me as if "everyone has to respond."

Here is the section of the current Bankruptcy and Insolvency Act that deals with this (Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3, 54 (1) and (2)):
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Vote on proposal by creditors

    54 (1) The creditors may, in accordance with this section, resolve to accept or may refuse the proposal as made or as altered at the meeting or any adjournment thereof.
    Marginal note:Voting system

    (2) For the purpose of subsection (1),

        (a) the following creditors with proven claims are entitled to vote:

            (i) all unsecured creditors, and

            (ii) those secured creditors in respect of whose secured claims the proposal was made;

        (b) the creditors shall vote by class, according to the class of their respective claims, and for that purpose

            (i) all unsecured claims constitute one class, unless the proposal provides for more than one class of unsecured claim, and

            (ii) the classes of secured claims shall be determined as provided by subsection 50(1.4);

        (c) the votes of the secured creditors do not count for the purpose of this section, but are relevant only for the purpose of subsection 62(2); and

        (d) the proposal is deemed to be accepted by the creditors if, and only if, all classes of unsecured creditors — other than, unless the court orders otherwise, a class of creditors having equity claims — vote for the acceptance of the proposal by a majority in number and two thirds in value of the unsecured creditors of each class present, personally or by proxy, at the meeting and voting on the resolution.
------------------------------------------------------------------------------------

Hope you can keep us posted on how it's going. Good for you, that you are seeking additional advice.  :)

~Wendy

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Wetcoaster

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #8 on: April 05, 2017, 03:27:19 PM »
Which Province are you in?  If there is a 4Pillars in your Province contact them for a free consultation.  Trustees do not work to get you the best deal.

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NotATrust-E

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #9 on: April 05, 2017, 09:41:21 PM »
1)   50% in number of voting creditors and 66.6% in “voting dollars” must vote yes. This could be one creditor owed $1,000.

2)   Unless you live in PEI, more than one LIT firm operates in your province. See ic.gc.ca/app/osb/tds/search.html?lang=eng for details. This is not an exhaustive list.

3)   If you cannot afford surplus income payments, there is mandatory mediation. See Subsection 170.1(1) for details. This means that you would come to an agreement to pay over time.

4)   A small point: A rejection by creditors is called a ‘Deemed Assignment’. A default is entirely different and, for a Division I proposal, is covered by Section 62.1. See Section 57 for details of what happens after a Division I proposal is rejected.

5)   If you do make a Division I proposal, once it is accepted, and approved by the court, the terms cannot be changed unless you request an amendment. This means that you can take on another job subsequent to the acceptance of your proposal and it will not affect your payment.

6)   It is possible to include a term in the proposal that indicates that the net proceeds of the house would go towards satisfying the terms of the proposal.

7)   Regarding Joint Division II proposals: Section 66.12(1.1) says that “Two or more consumer proposals may… be dealt with as one”. The ordinary reading of this phrase suggests that the combined limit is $250,000, as the two are being combined into one proposal. Directive 2R has more information regarding joint administrations.

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francaisboots

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #10 on: April 06, 2017, 06:55:12 PM »
Thank you so SO much for that link to find other trustees. I had been searching for that information inside out on the internet!! WHAT A RELIEF!!!! Thank you, Thank you!

Also, I will check out the other links.

Thank you!


1)   50% in number of voting creditors and 66.6% in “voting dollars” must vote yes. This could be one creditor owed $1,000.

2)   Unless you live in PEI, more than one LIT firm operates in your province. See ic.gc.ca/app/osb/tds/search.html?lang=eng for details. This is not an exhaustive list.

3)   If you cannot afford surplus income payments, there is mandatory mediation. See Subsection 170.1(1) for details. This means that you would come to an agreement to pay over time.

4)   A small point: A rejection by creditors is called a ‘Deemed Assignment’. A default is entirely different and, for a Division I proposal, is covered by Section 62.1. See Section 57 for details of what happens after a Division I proposal is rejected.

5)   If you do make a Division I proposal, once it is accepted, and approved by the court, the terms cannot be changed unless you request an amendment. This means that you can take on another job subsequent to the acceptance of your proposal and it will not affect your payment.

6)   It is possible to include a term in the proposal that indicates that the net proceeds of the house would go towards satisfying the terms of the proposal.

7)   Regarding Joint Division II proposals: Section 66.12(1.1) says that “Two or more consumer proposals may… be dealt with as one”. The ordinary reading of this phrase suggests that the combined limit is $250,000, as the two are being combined into one proposal. Directive 2R has more information regarding joint administrations.

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TreeFrog

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Re: Not eligible for CP, Can't afford Surplus Payments.. Screwed by bank
« Reply #11 on: April 06, 2017, 07:28:15 PM »
This forum didn't used to allow the posting of links...good that it does now! Here's where you can find the entire Bankruptcy and Insolvency Act:
laws-lois.justice.gc.ca/eng/acts/B-3/

Glad you have found you have some choice of Trustees! It will make a huge difference.

Take care,
~Wendy

 

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