Pointers To Consider When Designing A Consumer Proposal
If you already have a broad understanding of how does a consumer proposal works, then surely you’re aware that it is a better alternative than filing for bankruptcy. A consumer proposal outweighs bankruptcy in terms of its advantages as you don’t have to surrender your valuable assets. However, another crucial process that you need to consider is how to design your consumer proposal to increase the possibility of having your creditors accept it.
Will My Creditors Accept My Consumer Proposal?
The key to ensuring that your consumer proposal will be accepted by creditors is to design a strong proposition that is likely to be accepted by 51% of the creditors. Therefore, a consumer proposal should be convincing enough to attract creditors in accepting it. Once you submitted your consumer proposal, the creditors will have to decide whether to accept or reject the offer. This is the main reason why constructing or designing a consumer proposal is a vital process.
Why Most Creditors Prefer a Consumer Proposal over Bankruptcy?
In general, most creditors will likely settle for a consumer proposal over bankruptcy since they are usually compensated more than the amount that the debtors owe to them. However, this isn’t true at all costs, when associated with the other debt-relief options available in Canada. That means, creditors usually obtain less in a consumer proposal than what they can get from debt consolidation or debt settlement. Besides, you must evidently prove that you have attempted all the other debt solutions yet still failing to overcome your indebtedness. If you are able to show that bankruptcy is your only way out, then your creditors will likely agree and accept the terms under your proposal.
How Much Money Should I Offer to Increase the Chances of Being Accepted?
One of the advantages that you get from a consumer proposal is the flexibility of what you can stipulate as an offer to your creditors. This proposition is not offered in bankruptcy wherein you are urged to abide in surrendering your assets; thus, giving your creditors the authority to seize your assets except for those exempt by your province or territory. On the contrary, once your consumer proposal is accepted, you can enjoy the same benefits that you can get from bankruptcy without the fear of losing your property and assets. Furthermore, the higher you can compensate your creditor the more chances of having your proposal being accepted.
Moreover, whatever debt solutions you’re trying to take, may it be a debt settlement or a consumer proposal, you can deny the fact that creditors are not alike. The truth is there are no general features that can be perceived as acceptable for each creditor. Also, keep in mind that you have to execute your willingness to settle your debts by reaching out to your creditors and negotiating all possible means to wipe out your debt.
In terms of offers, experts highly suggest to proposed not less than 15 to 40 cents per dollar. As they’ve perceived that this amount implies your sincerity to pay off the amount you owe from your creditors. In some cases, you need to construct a more convincing offer to the creditors holding 51% of your debts. This happens when you owe money to several creditors. Taking for instance that the others may refuse the offer, what’s important is for you to draft a proposal that the other 51% will likely to favor. By doing so, the proposal will be imposed on all considering that a simple majority of creditors had it accepted.
Once the proposal is submitted, your creditors will then vote if they are to accept or reject the offer. The voting works with an individual creditor getting one vote for every dollar. The calculation will make sense considering that the creditors to which you owe the largest debts will likely get more votes than the other. Having this idea, you should then design your consumer proposal in a way that these creditors will perceive as a good deal.
As an example: Your debt sump up to $150 from the three creditors that you owe. With Creditor A- holding $75 will get 75 votes, Creditor B-holding %50 will get 50 votes, and Creditor C-holding $25 will get 25 votes; If you are to design a proposal, you have to make sure that it will appeal favorably to Creditor A and B. This way, Creditor C will be forced to abide regardless if he rejected the proposal.
In addition, if your proposal gets rejected by a creditor holding 25% of your debts, your trustee will set up a meeting between your creditors wherein voting will be casted again. The bottom line is, you just need 51% approval from your creditors for your consumer proposal to prosper.
Will My Creditors Accept My Consumer Proposal if I File Them on My Own?
Since a consumer proposal concerns legalities as it is a binding legal agreement, your creditors will surely turn down your proposal if it’s not filed according to the due process. Should you decide to file for a consumer proposal, the first thing that you need to do is to contact a licensed bankruptcy trustee. Thus, a consumer proposal is the same way as to how you file for bankruptcy minus the large expense or cost.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.