Question: I owe $70,000 in unsecured credit card and bank debt. I have a good credit rating and I don’t want to go bankrupt but want to eliminate my unsecured debt. I would like to go the Consumer Proposal route. I only have one creditor. My situation is that I can only afford between $300-$350 a month. Will the creditors accept that? And if they do, would they ask me to go longer than three or four years?
What Credits Will Accept In A Proposal
A consumer proposal is a formal, legal offer made by a debtor to his creditors to settle his outstanding debt for less than the total amount owing. Although you can offer a lump sum payment, you usually make a monthly payment for a maximum of 5 years. The majority of unsecured creditors (in terms of dollars) must agree to the proposal for it to be accepted.
Whether or not the creditors will accept a consumer proposal depends on a number of factors. The most important consideration will be how much the creditors would receive if you went bankrupt. This is a complex calculation that can be performed by your consumer proposal administrator to help you present a viable proposal that will have a better chance of being accepted by your creditors. Whatever you decide to offer, basically the creditors are unlikely to accept a proposal that pays them less, or even the same, than they would receive in a bankruptcy.
Some of the things your trustee will look at:
If based on your income you would be required to pay surplus income and surrender assets with a total value of $15,000 in a bankruptcy, the creditors would not accept only $5,000 in a proposal. However, if you offered $24,000 (say $400 per month for 5 years), they probably would accept it, since it is better for them than a bankruptcy.
They may also consider your past payment history, your family obligations, what assets you own, and other factors.
Considering a Consumer Proposal?
If you are considering a consumer proposal the best step is to talk to a consumer proposal administrator, who is also a trustee in bankruptcy. Contact a licensed, trustee in bankruptcy today. They will review your personal situation and help you choose the right solution.