Perry Krieger & AssociatesA Proposal is an arrangement between an individual and his/her creditors where he/she will pay a portion of the debt that is owed over time. The proposal is presented to creditors who vote on whether to accept or decline the proposal. The proposal is a structured process to settle with creditors without filing an assignment in bankruptcy.
Proposals can involve many small payments over a number of years or few larger payments. The proposal is created based on your ability to make payments that are fair to both yourself and your creditors. Generally you contribute only a fraction of what you owe, and pay small amounts over time. Interest stops the day you file a proposal.
How can a proposal help?
If a proposal is accepted, you are not bankrupt and are able to keep all of your assets. Filing a proposal stops legal actions (including garnishments and collection efforts) by your creditors and provides an orderly process for explaining your financial situation and coming to a compromise. Interest stops accumulating as of the date that you file your proposal.
Why should I file a proposal versus a bankruptcy?
If your earnings are sufficient to manage a portion of your debts over a reasonable period of time, a proposal may be the answer. A proposal allows you to keep your assets while providing predictable payments over time in settlement of your past debts. Filing an assignment in bankruptcy when you could have filed a proposal could delay you obtaining your discharge from bankruptcy. A proposal offers a better credit rating going forward and means that you haven’t been bankrupt before, which may improve your ability to obtain credit in the future.
What is the difference between a consumer proposal and a Division I proposal?
A consumer proposal is an expedited proposal that streamlines reaching an agreement between you and your creditors. The consumer proposal is available to individuals only, who owe less than $250,000 excluding debt on your home. The consumer proposal minimizes the occurrence of meetings unless necessary and certain other requirements, making it a faster and more efficient process for common scenarios.
Debtors who owe more than $250,000 or with unique circumstances could be eligible to make a proposal under Division I of the Bankruptcy and Insolvency Act.
What can I offer in a proposal?
A proposal can be as creative as your circumstances allow. Examples of proposals could be some combination of a cash settlement of a fraction of your debt payable over a number of years, a lump sum payment made available by a third party such as a friend or family member, a lump sum payment from the sale of property (or home remortgaging), or any other arrangement that is agreeable to both you and your creditors.
How do I file a proposal?
A licensed Trustee will provide recommendations based on your assessed financial situation. The proposal is drafted by the Trustee, reviewed with you, and sent to all creditors along with a report and other documents. A meeting of creditors is held if required and a decision made.
Why would creditors approve my proposal?
A proposal is generally approved if it provides a better return to creditors than they would obtain through bankruptcy. Perry Krieger & Associates Inc. can help you reach a fair compromise for both you and your creditors. A part of the duties of the Trustee is to provide a recommendation to your creditors based on the proposal.
What is the process after the proposal is approved?
A consumer proposal must be completed within five years. Regular payments, based on the schedule offered in the proposal, must be made to the Trustee in Bankruptcy. The Trustee, according to a distribution schedule specified in the proposal, will make periodic payments of those funds to your creditors.