Consumer Proposal out of Bankruptcy
Convert from a Bankruptcy:
Sometimes people file an assignment in bankruptcy and their circumstances change so significantly that they find themselves having to pay large or significant monthly payments on that income. As an alternative to continuing with the bankruptcy, you can file a proposal with your Trustee out of bankruptcy, where you agree to pay a smaller amount each month for a longer period of time and keep more money each month. The creditors benefit by your proposal because you are agreeing to pay more, and you benefit because the proposal will allow you to make more manageable payments and improve your lifestyle. The drawback to this option is that you must agree to pay your creditors more than they would receive in the bankruptcy, in order to encourage them to accept your proposal out of bankruptcy.
People whose jobs depend on being out of bankruptcy by a certain time, often elect to proceed with his option. To create an incentive for your creditors to vote in favour of the conversion, the proposal out of bankruptcy and the added payments have to be perceived as being worthwhile to your creditors.
Example: Let’s say your circumstances change, and you find yourself owing surplus income of $900.00 per month and your bankruptcy will run 21 months, such that you will end up paying $18,900.00, but you just can’t make the $900 payment each month. As an alternative, you may offer a proposal to pay your creditors $500.00/month for 48 months or $24,000.00. The added sum compensates the creditors for the time value of money received over a longer period and allows you to put $400.00 back into your monthly budget. If your creditors accept this type of proposal, your bankruptcy is annulled, or cancelled, and you move forward as if you had always filed a proposal.
Creditors often ask that you post security, such as a lien on your home or car for surety of performance of the proposal by you.
We have considerable experience in dealing with creditors, and we specialize in tailoring Consumer Proposals to fit an individual’s specific needs. We want to ensure that any payment plan you are committing to is not so onerous or difficult for you, that it leads to an inability to complete the proposal.
In order for any Consumer Proposal you consider to be successful, it should provide you with a little money left over for you to reward yourself once and a while, even it is just a little bit. One of our Licensed Insolvency Trustees would be happy to sit down with you and help you draft a proposal. So please do not hesitate to contact us.