When you are having financial problems, it is important to know that there is help out there and you have options available to you other than filing for bankruptcy. One option that you have is to sit down with a consumer proposal administrator and have them negotiate a settlement between you and your creditors. This settlement is called a consumer proposal.
What is a consumer proposal?
Basically, a consumer proposal is a legally binding settlement that is negotiated on your behalf by a consumer proposal administrator to pay a portion of your debts over a period of time. This can be up to a maximum of five years.
Only a trustee in bankruptcy can be a consumer proposal administrator as a consumer proposal is administered under the Bankruptcy & Insolvency Act.
How is a consumer proposal negotiated?
When we look at what to offer the creditors in a consumer proposal, we look at three major factors:
- Is the consumer proposal fair and reasonable to both you and your creditors?
- Will your creditors receive more money in the consumer proposal than they would receive in a bankruptcy scenario? and
- Do you have enough money left over every month, after paying your reasonable living expenses to pay for your consumer proposal?
After we have helped you put the proposal together, we send it off to your creditors so they can vote on the acceptance of the proposal. The creditors then have 45 days to vote. When voting, they have 3 options:
- They can accept the consumer proposal as filed;
- They can reject the consumer proposal; or
- They can call a creditors meeting to either ask for more money or they could ask for specific terms to be included in the proposal.
In order for a consumer proposal to be accepted, we have to make sure that over 50% of the dollar value of the creditors agree to it. Our team at Hoyes Michalos and Associates have negotiated thousands of consumer proposals and we have a very good idea of what the creditors will accept.
In a general in a consumer proposal we would offer your creditors around 30% of your total unsecured debts, as long as that amount is more than what the creditors would receive if you were to file a bankruptcy. So if you owed $50,000 in debts, you may be able to offer $15,000 or $250 a month for 5 years.
If you would like more information on how we can negotiate with your creditors for you to pay only a portion of your debts, then give us a call at 310-PLAN (no area code is required) and book a free consultation to visit one of our offices in the GTA.