Bankruptcy Alternatives in Manitoba: Consumer Proposal

Proposals to creditors are best suited for those who have a good job, make decent pay, and can afford to make payments, but need an extended amount of time to do so.

Consumer proposals are also good for people with debts in excess of $5,000, to a maximum of $75,000.

A consumer proposal is similar to a debt management plan; only, a consumer proposal is legally binding and is administered by the courts and a licensed bankruptcy trustee.

Advantages of filing a proposal include a maximum period of 5 years, it is usually accepted by creditors, interest is frozen from the date you file, you can negotiate to repay only a portion of the debt, wage garnishments are stopped, and your creditors cannot take any legal action against you. In addition, by opting for a proposal as an alternative to bankruptcy, you avoid personal bankruptcy.

At the beginning of the process, your bankruptcy trustee will assess your financial situation and determine what kind of monthly payments you can afford to make. That amount will then be compared to the amount you owe, and from there the trustee will determine how many months it will take to pay off all debts.

If the numbers seem reasonable to both you and your creditors, the trustee will prepare the needed paper work to file a consumer proposal.

Under the Bankruptcy and Insolvency Act, your creditors have 45 days to vote for or against your proposal. If 50% or more vote in favour of your proposal, it is considered acceptable by all creditors. Typically your creditors will accept your proposal, as they would get even less money if you filed for bankruptcy.

If 25% or more of your creditors do not vote in favour of your proposal, your trustee will call a meeting of creditors to re-negotiate the proposal. You must attend this meeting.

Fifteen days later, if there are no objections; your proposal will be approved by the court. From that day on, you and your creditors are locked into the terms of the proposal.

You are allowed to miss up to two payments throughout the duration of the proposal. Your trustee will simply add two payments at the end. However, if you miss any more than two, the proposal collapses and is annulled by the court. Your creditors can then go directly to the court to have your wages garnished, and interest charges are applied to debts all the way back to the day you filed.

Immediately after you file a consumer proposal, your credit rating will be altered to reflect your current financial situation, and will likely remain that way until the proposal is complete. A note will also stay on your credit report for seven years starting from the date that you filed.

Trustee fees are set by the Superintendent of Bankruptcy. Normally your trustee is paid out of the proceeds of your proposal.

Finally, if you are having financial problems, and feel that a consumer proposal may be your best option, please contact us immediately. Our bankruptcy trustee in Manitoba will offer you an initial consultation free of charge. We will discuss your personal situation, answer your questions about bankruptcy and bankruptcy alternatives, and help you decide on the option that best fits your case.