What is a Proposal ?
A Proposal is an alternative to bankruptcy.
A Proposal is a formalized contract to attempt to settle with your creditors. It may consist of a plan to pay your debts in full over a period of time with one monthly payment and no further interest or penalty, or it may be a plan to pay a portion of your debts over a period of time with one monthly payment. There are many options available to explore when considering a Consumer Proposal, therefore speaking to a consumer proposal administrator is recommended. Click Here to find a Canadian Consumer Proposal Administrator near you.
What are the benefits of a proposal?
- avoid bankruptcy
- stop interest
- one monthly payment
- can extend the period of time to pay the debts
- stop legal actions
- stop harassing phone calls
- keep your assets
- your creditors get paid more than they would in a bankruptcy.
What are the major steps involved in filing a proposal?
Schedule a meeting with a Licensed Insolvency Trustee for an initial consultation.
The purpose of an initial consultation is to assess a debtors options, explain how each option will impact the debtor and answer any questions.
Terms of the Proposal
After you have met with a Trustee and determined how you wish to proceed, you must decide on the terms of your proposal. A proposal must be fair to both the debtor and the creditors. A Trustee will help decide what you afford to offer your creditors. The terms of each proposal differs depending on individual circumstances. A proposal must offer the creditors more than they would receive if you were bankrupt. If you are offering what you can afford based on your individual circumstances and this amount is more than the creditors would receive if you were bankrupt, there is a strong likelyhood the creditors will consider accepting the proposal.
Sign the proposal and supporting documents.
If you decide to file a proposal the trustee will help prepare the necessary documents to be signed along with the proposal. Once the documents are signed they will be filed with the Official Receiver.
Stay of Proceedings.
Like a Bankruptcy, once the Proposal documents are filed – a stay of proceedings goes into effect to protect a debtor from their creditors. A Stay of Proceedings acts as a legal wall to stop Creditor harassment, Collection Proceedings, Garnishments and even Interest.
Mail Notice to the Creditors
Once the trustee receives confirmation from the Official Receiver that the documents have been filed, the trustee mails notice of the proposal along with the necessary supporting documentation to the creditors to allow them to make an informed decision on the acceptance or rejection of the proposal. Along with the proposal documents is notice of the date, time and place scheduled for a meeting of creditors.
- Meeting of Creditors / Vote – At the meeting of creditors the creditors will consider whether they are willing to accept or reject the proposal. A proposal is accepted if the unsecured creditors, entitled to vote, vote either in person or by voting letter to accept the proposal by a majority in number (a count of creditors voting) and two-thirds (2/3) in value of proven claims.
- Court – When the creditors vote to accept a proposal it needs to be approved by the Court before it becomes binding on all unsecured creditors, whether or not, they voted to accept the proposal.
Complete the terms of the proposal
Once the Creditors and Courts have approved the debtor’s proposal, the debtor has the equivalent to a new contract with his/her creditors. The debtor will now have to complete the terms specified in their proposal in order to be released from the proposal by way of certificate of full performance.
Certificate of full performance
A certificate of full performance is the legal form that signifies the completion of the proposal and releases a debtor of any remaining debts covered by the proposal. A certificate of full performance is issued by the Trustee upon the completion of all the terms of the proposal. Upon receipt of this certificate the debtors proposal is officially complete and the debtor can begin a new financial future.
Depending on your specific situation one or more of these terms could be offered in your proposal to creditors.
- Lump sum
- Fixed monthly payments
- Stepped Payments
- Floating Payments
- Full Payment (principal only)
- Percent Payment (%)
- Net Proceeds from Sale of Assets
If you are getting behind in your debts and would like to discuss filing a proposal with your creditors, contact a licensed insolvency trustee.