Beware of being scammed by someone you trust
Dear Ross, I have worked in a busy gentleman’s club for three years as a bartender. Last year I began dating Sam the owner, and he suggested I put together the money to buy the club, as it was ‘printing money’. I was very intrigued. He also suggested I allow him to use my credit cards for a couple of months, since he knew of many “tricks” to increase my credit score quickly so I could qualify for a business loan.
I trusted him completely, and sure enough I qualified for a loan of $150,000 and I bought the club. The day after the deal closed, none of the dancers showed up for work. I had a room full of angry clients, and several waitresses and other staff looking to get back pay owed to them.
It turns out Sam had secretly opened another club not far away, and had taken all the dancers with him. I suspect some of them are here in Canada illegally, and they felt they had no choice but to comply. My business investment was a complete disaster, and within a few weeks I had to walk away from everything. Worse still, I found out my credit cards were all maxed out.
Can I explain all this to my creditors and avoid bankruptcy? It’s not my fault – Sam used my credit cards, and tricked me into buying his club, which immediately became worthless.
-C.S. Brampton, Ontario
Ouch!! This sounds more like a case for the police! As a credit counselor, I have to tell you that you and yourself are fully responsible for the $150,000 business loan, and almost certainly for the credit card debt Sam rang up. You said yourself that you willingly gave the cards over to Sam to use. I know you have learned your lesson Cassie, but for the benefit of my readers, I’ll sum it up as follows:
- Never hand over your credit cards to someone else. You are effectively giving them a blank check and the keys to your credit history.
- If you ever wish to purchase an existing business, seek the services of a lawyer experienced in such matters, S/he can represent you in negotiating the terms of your transaction and do everything possible to try to reduce your exposure to an unfair, one sided transaction.
Bankruptcy is likely the best option
Given you have no money and no possible way of repaying the money anytime soon, then yes you need to examine your options very carefully, and find relief from all these debts. Thank goodness we live in a country which gives people a second chance!
Most likely, your best two options are either a personal bankruptcy or a consumer proposal. From the full picture you have given me (privately) I think bankruptcy is the best option for you. There is an excellent chance you will be discharged automatically within nine months, and your cost will be limited to the trustee’s fee of $1,800 plus any tax refunds you may otherwise have been entitled to.
You can pay $200 when you sign up for the bankruptcy, and do an automatic debit from your checking account for $200 for the ensuing eight months.