Contrary to the advertisements that may pop up on your social feeds, there is no quick fix to reduce your debt by 80%. There is a consumer proposal, which is a formal filing under the Bankruptcy and Insolvency Act to compromise the amount that you owe to your creditors, payable over a maximum of 5 years. The proposal, once accepted, is all that you will pay – there is no additional interest, and the trustee’s fees are included.

How do you determine how much to offer your creditors in a proposal?

Based on personal circumstances, some people want to pay the least amount possible, while others feel a moral obligation to pay the most they can afford.

So, what is the right amount to offer?

A consumer proposal must offer your creditors more than they would receive in a bankruptcy. A proposal can only be filed with a Licensed Insolvency Trustee (LIT) who will consider:

  • The realizable value of any assets that you own. Savings, investments, vehicles and real property are all assets. The trustee will look at the value compared to any exemptions or secured loans to determine if there is excess value realizable in a bankruptcy.
  • Surplus income payments – based on your income and family size, you may be required to make surplus income payments in a bankruptcy. The number of months you will be required to make the payments will depend on whether this is a first or second bankruptcy filing.
  • The amount that you owe and who you owe money to. LITs have experience in filing proposals and have a general idea as to how much each financial institution may accept in a proposal.
  • If you have sold or transferred any of your assets in the last five years, and how you disposed of the proceeds.

Based on the above, the LIT has the experience and knowledge to recommend an amount you can offer your creditors in a consumer proposal. If the terms are not initially accepted by the majority of your creditors, the LIT will negotiate with you and your creditors to try to come to an agreement on the terms. f you feel a consumer proposal could provide you the relief needed to deal with your debt, reach out to Taylor Leibow Inc. today for a free consultation.

Kathy LenartBy Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)