Just like no two individuals' debt problems are the same, no two consumer proposals will ever be exactly the same either. However the driving forces behind how a consumer proposal is negotiated do follow a similar pattern.
Debt Is Different For Everyone
The size of debts, types of creditors and other factors, like how and when the debt was incurred, will be different in every single consumer proposal ever filed. Debt is incurred in different ways, by different people, for different reasons. The reasons for wanting to file a consumer proposal may be different too; some people file because they face the threat of legal action, some because the size of the debt is too overwhelming to maintain and some because they have recently suffered an unexpected event like a drop in income, marital breakdown or medical problem.
Common Requirements of All Proposals
What all consumer proposals have in common is that they are filed by individuals who find themselves unable to repay their debts. Only if you’re insolvent, do you qualify to be eligible to file a consumer proposal. All consumer proposals filed in Canada must be done so by a licensed trustee and must comply with the rules and regulations outlined in the Bankruptcy & Insolvency Act.
What all consumer proposals must provide for is a greater benefit to creditors than they’d receive in a possible bankruptcy scenario. There’d be no sense in a creditors accepting a consumer proposal if they’d likely see a higher repayment from a bankruptcy.
A trustee experienced in filing consumer proposals with many different creditors get's to know what individual creditors are looking for and what will work. It’s for this reason that almost every consumer proposal filed at Hoyes Michalos is accepted by creditors.
What this means is that the factors in determining what a consumer proposal will cost are the same for everyone however the end result of the calculation may be different. All negotiations are based on what you own and how much you make. How much you choose to offer however can depend on how fast you want to pay off your proposal and what your budget looks like.
Our video on what a consumer proposal costs explains more:
Tailoring A Consumer Proposal For Success
A consumer proposal may be offered over a period of up to five years. Many people take advantage of this to stretch their monthly payments over as long a term as possible to reduce the burden on their monthly budget. However, there’s nothing to say a consumer proposal cannot be offered over a shorter term, as some people prefer to pay off their consumer proposal early, to put it behind them.
You may hear claims that a consumer proposal can reduce your debt by 80%. That may be true in some cases, but not all. Someone who has no assets and low income may benefit by such a sizable reduction, however, someone who has a moderate or high income, or assets to their name, may be expected to offer to repay a larger portion of their debt.
The amount to be repaid in a consumer proposal will also be determined by the wishes of the creditors involved. Some creditors may not be too concerned with how much of the debt is being repaid, so long as the offer is better than what might be expected in a possible bankruptcy. However, some creditors may only accept a consumer proposal if they are receiving at least one third, half or two thirds of the debt regardless of how little may or may not be available through bankruptcy.
Because each person's situation is unique a consumer proposal should be tailored specifically to meet your needs. And because we believe good advice comes from dealing with experts, that is why at Hoyes Michalos you always meet with a trustee to discuss your unique situation.