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A proposal is simply an agreement between a person and his creditors whereby the person pays only a portion of his debts (say one-half), thus avoiding bankruptcy.
A proposal is made to the creditors through a Trustee in Bankruptcy. It does not mean you are bankrupt.
If the creditors vote in favour of the proposal, and the court approves it, then the proposal is a binding contract which all creditors must accept even the creditors who did not vote for the proposal.
Proposals are a better deal for the creditors than bankruptcy and in the vast majority of cases are accepted!
A Consumer Proposal is a means to negotiate with your creditors for the reduction of you debts and/or extension of time for payment of their debts. The payment schedule that is created in consultation with a your advisor is based on your income, living expenses and family creditors. It prevents your creditors from taking legal actions to seize assets or garnishee wages.
Under the Bankruptcy and Insolvency Act, a trustee or an administrator files a Proposal or an arrangement between you and your creditors to have you
Pay off only a portion of your debts
Extend the time you have to pay off the debt
Propose some combination of both.
To be acceptable, your creditors must be better off under a Proposal than if you go bankrupt.
Proposals are almost always accepted since the creditors will certainly get more than if the debtor goes bankrupt.
A Consumer Proposal is available to debtors owing less than $250,000, excluding a mortgage on the principal residence
Generally, a personal proposal is better than credit counselling arrangements
The debtor is not automatically bankrupt if the consumer proposal is not accepted
The proposal and the payments cannot be for a term of more than 5 years
Stay of all proceedings against the debtor
All creditor collection efforts, including garnishees, must stop when a proposal is accepted
Debtor is required to take two counselling sessions
Can only be filed through a trustee in bankruptcy or an administrator of consumer proposals
The creditors must be better off under a Proposal than under a bankruptcy
Administrator must file a report to the creditors on the affairs of the person and the causes of financial difficulty
This is not legal advice, it is information
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