If you are struggling with a level of debt that is impossible to handle, then it’s worth being aware that there is an alternative to bankruptcy.
You can consider filing a consumer proposal.
A consumer proposal is an offer to all your creditors to reduce the level of debt that you owe but crucially still pay back more than they would receive if you did file bankruptcy.
Once you file a consumer proposal, your creditors will have 45 days to vote on whether to approve it or reject it.
They can also move towards asking for amendments and this will usually occur if they think you can afford more.
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When Will A Consumer Proposal Be Rejected?
Each creditor receives a vote for every dollar that you owe to them.
The voting process operates on a majority rule.
So if more than 50% of your debts receive a favourable vote then the consumer proposal passes and the creditors that voted no are also bound by the terms.
This includes all your unsecured debts but crucially not secure debts such as a mortgage or car payments.
If the majority of the creditors vote no then your consumer proposal has effectively been rejected but this is not the end of the process.
Remember, creditors are inclined to ultimately accept a consumer proposal because they always stand to get more than if you are declared bankrupt.
What Happens After A Proposal Is Rejected?
Usually, creditors will request changes to the proposal which will ultimately mean that you end up paying more.
However, you can extend this over the full sixty months of payments in most cases.
This is the maximum amount of time you can take to complete a consumer proposal.
- Withdraw the proposal and instead file bankruptcy.
- Withdraw and pursue a different debt relief option like debt management.
- Renogiate with terms that are more beneficial to the creditors.
- Withdraw and then file again at a future date.
Be aware that if you choose the last option you will not be granted protection from creditors if you file again within six months.
The best option will always be to make sure that you work with a trustee to guarantee that your proposal is favourable to the creditors.
This means that they will have no reason to reject it.
Ultimately, you should not try and avoid paying less than you can afford because this will lead to a rejection.
Are you thinking about filing a consumer proposal with a trustee?
If so we can help and also discuss some of the alternate options for handling your debt effectively.
You can call us now or fill out a free evaluation and a friendly member of our team will get back to you without delay.
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