The Terms of the Consumer Proposal

There are two essential aspects to a consumer proposal; what you can realistically pay and what your creditors are prepared to accept. The licensed insolvency trustee ensures that a proposal with a good chance of acceptance by creditors and manageability for the debtor is put forward.

The proposed payment must be an amount you can handle paying each month. That is why the first step of the consumer proposal, the financial assessment, is so important. A realistic understanding of what you earn (after taxes, alimony, and child support) and your actual cost of living (food, shelter, utilities, transport, health, insurance, clothing, tuition fees, text books, personal grooming, cigarettes, coffee habit, emergency buffer, movie money, etc.) is essential. Setting the payment too high almost guarantees that you’ll soon be in trouble again.

The payment you propose to your creditors must be greater than the amount they would receive if you went bankrupt (remember, in bankruptcy certain assets are sold to generate funds to repay creditors). If this is not the case, your creditors are unlikely to agree to the consumer proposal, as it makes poor business sense.

In some circumstances, even if your proposal meets these terms, some of your creditors may refuse to accept them. In this scenario, an experienced licensed insolvency trustee may be able to tweak the proposal until it is works for all parties involved. Every lender has different criteria for agreeing to or rejecting a consumer proposal.