A brief introduction to consumer proposals
Consumer proposals are legally binding agreements between a debtor and their creditors.
The idea is to put forward a solution that is mutually beneficial for both parties.
Consumer proposals are an attractive alternative for people who may be thinking about filing for bankruptcy because they enable you to keep hold of assets that may otherwise be lost through bankruptcy.
In Canada, consumer proposals are becoming increasingly commonplace.
In 2018, consumer proposals accounted for 56% of insolvencies, compared to 52.6% in 2017.
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Consumer proposals: A bank’s perspective
When you draw up a consumer proposal, the aim is to encourage creditors to accept it.
Individuals who are looking to file a proposal work with experienced Licensed Insolvency Trustees (LITs) to create a proposal that will be appealing to the creditors involved.
From the bank’s perspective, the proposal should provide a better option than bankruptcy.
Representatives from the bank will analyse and evaluate each individual proposal to ensure that it offers favourable terms.
There is an option to reject the proposal, and a creditor may request changes or revisions if they feel that the debtor could afford to pay more, for example.
The terms should always be better than bankruptcy.
Some banks have specific criteria and requirements in place, while others will make decisions based on individual proposals.
One bank may look to recoup a minimum of 25% from the proposal, for example.
Licensed Insolvency Trustees work with creditors all the time, and they use their expertise and experience to create consumer proposals that are likely to be accepted.
The consumer proposal must be viable for the debtor and the creditor.
The individual must be able to afford the payments set out in the proposal, but the creditor will want to ensure that they are not getting less than they feel they are entitled to.
If the initial proposal suggests a fee that is lower than anticipated, it may be rejected.
To pass, a proposal must be voted for by the majority of creditors.
Expert help for filing a consumer proposal
If you’re thinking about filing a consumer proposal, your Licensed Insolvency Trustee will work with you to put forward a plan, which suits you and your creditors.
Your LIT will establish a suitable budget for repayments and review your creditors to produce a proposal that will work for you and satisfy your creditors.
If you have any queries, or you need advice, we are here to help.
With several years of experience in dealing with consumer proposals, we can help you work towards a brighter future.
Summary
Consumer proposals are legal agreements, which set out plans to repay creditors.
From a bank’s perspective, a consumer proposal should be fair and it should offer favourable terms to bankruptcy.
To find out more, call our friendly advisors today.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal
