There are a number of bankruptcy alternatives to choose from, but consumer proposals seem to be the most popular. In general, people tend to be more comfortable filing a proposal, than filing for bankruptcy. Bankruptcy should be considered the last option for those in debt.
Ideal candidates for consumer proposals must have a stable job, and must have the capability to repay their debts if given an extended amount of time. A candidate’s debt should also be in excess of $5,000.
Advantages of consumer proposals include:
- A maximum period of 5 years.
- They are usually accepted by creditors.
- Interest is frozen.
- Negotiations can be made to pay back only a fraction of the debt.
- Wage garnishments are stopped immediately.
- Your creditors are “stayed” and cannot take legal action.
Your licensed bankruptcy trustee will begin by summarizing your financial situation and calculating the amount that you can afford to payback each month. If the amount is acceptable to both you and your creditors, the trustee will file the proposal.
Your creditors have 45 days to vote for or against your proposal. If 50% or more vote in favor of it, it is considered suitable by all creditors. Usually creditors recognize that they would receive less if you filed for bankruptcy, and will approve your proposal.
If there are no objections, your proposal will be approved by the court 15 days later. You and your creditors are then locked into the terms of the proposal.
If 25% or more of your creditors do not vote in favor of your proposal, your trustee will call a mandatory meeting of creditors. The trustee will help you and your creditors come to an agreement over an acceptable amount of payback.
During the course of the proposal you are allowed to miss as many as two payments, and the payments will simply be added to the end of the proposal. However, if you miss more than two, the proposal collapses and is annulled by the court. Your creditors can then apply to have your wages garnished, and interest charges are added to all debts.
Your credit rating will be adjusted to reflect your current situation, and it will probably remain that way throughout the entire process. There will also be a note added to your credit report for up to seven years starting from the date you filed.
Trustee fees are administered by the Superintendent of Bankruptcy.
If you are experiencing financial problems, and believe a consumer proposal is the best course of action, please contact us immediately. Our licensed bankruptcy trustees in Richmond want you to get the best advice possible. We will work with you to figure out the best possible solution to get you back on track, and ensure that difficulties do not occur in your future.