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Consumer proposals are common bankruptcy alternatives for those who have the capability to pay back their debts, but need extra time to do so.
Ideal candidates for consumer proposals are people with debts in excess of $5,000. Candidates should also have a stable income.
Advantages of filing consumer proposals include a 5 year maximum period, they are generally accepted by creditors, interest is frozen, deals to pay back only a portion can be negotiated, wage garnishments end, and your creditors are “stayed” from pursuing legal action.
Your trustee will begin by reviewing your financial situation to establish the amount you can afford to pay back each month. If you and your creditors both agree with the proposed amount, your trustee will file the proposal.
Creditors have 45 days to vote for or against your proposal. If a majority vote for the proposal, it is deemed acceptable by all creditors. In most cases creditors will vote for the proposal, as they recognize they’d receive even less if you filed for bankruptcy.
15 days later, if none of the creditors object to the proposal, it will be approved by the court. From that date on, you and your creditors are bound to the terms of the proposal.
However, if 25% or more of your creditors vote against your proposal, your trustee must call a meeting of creditors. It is absolutely necessary for you to attend this meeting, as it will give you and your creditors a chance to re-negotiate the proposal.
You are allowed to miss up to two payments during the proposal period without penalty. In this case, two payments will simply be added to the end of the proposal. However, if you miss any more than two, the consumer proposal will be annulled by the court, and interest charges will be applied to all debts starting from the day you filed.
Your credit rating will be altered to reflect your current financial situation after the filing. It will likely remain that way throughout the duration of the proposal. A note of the consumer proposal will also stay on your credit report for up to seven years.
Trustee fees are governed by the Superintendent of Bankruptcy, but generally the trustee will be paid from the proceeds of your proposal.
If you are considering a consumer proposal, contact us today. Our bankruptcy trustees in Burnaby, British Columbia will offer you an initial consultation free of charge, to review your situation and assist you in making the right choices.
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