I am thinking of filing for bankruptcy. I am currently unemployed, owe $550 in taxes, $650 in back payments for a school grant, $7500 in credit card and a co-signed loan for $8900. I bought a vehicle a few years ago for $26000 and still owe around $20000. How will bankruptcy effect these costs. I was thinking of using a credit card to pay off the loan first so that the co-signer wouldn't be effected. Is this possible or is this fraudulent. Also I will be going on a vacation this summer, however, the plane fare and travel expenses are being paid for by someone else. Will this be questioned?

If you use your credit card to pay off the co-signed loan within the year prior to filing for bankruptcy, the transaction will likely be treated as a fraudulent preference. The Trustee would recover the funds from the creditor and use them to pay all creditors in the bankruptcy. The creditor would then pursue the co-signer. If the creditor who received the funds did not return them to the Trustee you might be required to pay the $8,900 to the Trustee before you could be discharged.

If the Trustee can verify that it is a third party and not you who paid for the trip, then it shouldn't be a problem.

Ann Clarke
phone: (403) 296-2972
aclarke@moneyhelp.ca