The golden rule of a successful consumer proposal is that it must work for both the debtor and the creditor.
For a creditor to accept a debt proposal, they will want to receive more than they would in a bankruptcy.
For a debtor to succeed with a proposal, the payments must be affordable and reasonable given their financial situation.
The amount you will have to repay will depend on:
- who you owe money to (different creditors expect different recoveries),
- what assets you own that would be surrendered in a bankruptcy, and
- any surplus income you would pay in a bankruptcy based on your income.
Watch our video below to understand how the cost of a consumer proposal is typically calculated when you meet with a Licensed Insolvency Trustee.
What are the Consumer Proposal payment terms?
Proposal payments and terms are negotiated between the debtor and creditor with the help of the trustee acting as administrator. Once your proposal is accepted you make one, single monthly payment to the trustee.
Typically payments in a consumer proposal can:
- Extend from 1 to 5 years, although lump sum payments are also possible;
- Reduce principal repayment to as low as 25% of the original amount owing;
- Be paid off early at any time.
If your financial circumstances change you may defer up to two payments during a consumer proposal. Miss three payments and the proposal fails. Technically, your consumer proposal is ‘deemed to be annulled’ on the date your third monthly payment became due. If your credit proposal is annulled then your full debts return and your creditors may take action against you again. You do not however, automatically become bankrupt.
If you think you might miss a third payment you do have options available to put in place before your proposal fails. Your trustee can help negotiate and file amended payment terms. As long as these are accepted by the creditors, you can continue with the new proposal terms until completion. If your situation has changed dramatically, you can also choose to file bankruptcy during any proposal.
How does a Consumer Proposal Administrator get paid?
The cost of administering your proposal is included in your single monthly payment.
Consumer proposal administrators are licensed trustees, registered with the federal government under the Bankruptcy and Insolvency Act and as such fees paid to a trustee for administering a consumer proposal are set by legislation. Trustee fees are included in the payment you negotiate with your creditors. There are no additional fees, no up-front fees and no minimum fees. If your creditors agree to a deal to accept $350 each month, then that is all you pay. There are no up-front fees. You do not make any payments until your consumer proposal is officially filed.
Reduce your debt payments
Our team of Licensed Insolvency Trustees treat each situation as unique. We know there are no cookie cutter solutions and that is why we have such a high success rate for consumer proposals.
Hoyes Michalos has a 99% acceptance rate for all proposals we file. We understand what creditors are looking for and what debtors need.
We also offer convenient, flexible, pre-authorized payments to help make managing your payments easier. Arrange weekly, bi-weekly or monthly payments, based on what works for you.Contact Us Today