Newfoundland, NL, Consumer Proposals, Personal Proposals, Division I Proposals.

This PowerPoint presentation summarizes the steps involved in a Consumer Proposal.

A proposal allows you to avoid bankruptcy, while paying off only a portion of your debts.

Under the Bankruptcy and Insolvency Act, a trustee 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, or provide some combination of both. To be acceptable, your creditors must be better off under a Proposal than if you go bankrupt.

CONSUMER PROPOSALS

What is a consumer proposal?
How does a consumer proposal benefit you?
Who can make a consumer proposal?
How does someone make a proposal and what is the process?
What happens after a proposal is filed with the Official Receiver?
How does a proposal get accepted?
What happens if the proposal is rejected?
What if my proposal is accepted and I fully meet the terms?
What if I stop making the payments and default on the proposal?
Does it cost anything to make a proposal?

What is a Consumer Proposal?

A consumer proposal is an offer made by a debtor to his or her creditors to modify his or her payments. You may propose that you will pay a lower amount each month, but over a longer period of time, up to five years. You have the ability to offer your creditors less than the total amount owed to them, without interest over time, as a full settlement of your debt.

How does a consumer proposal benefit you?

Protection from your creditors is provided in that they cannot start or continue legal or collection procedures. You have the ability to consolidate payments to creditors into one monthly payment. You maintain control of your assets and you are not bankrupt even if your proposal is rejected.

Who can make a consumer proposal?

Any person who is insolvent, including a bankrupt, whose debts are less than $75,000, excluding a home mortgage, can make a consumer proposal. When a bankrupt wishes to make a proposal, the bankrupt must have obtained the assistance of a trustee who will be the administrator of the consumer proposal. Related consumer debtors with common debts totaling less than $75,000 may make a joint proposal.

How does someone make a proposal and what is the process?

The procedure begins when you seek the help of an administrator, usually a Trustee in Bankruptcy. He or she will ask you about your financial situation, assess it and give you advice about what kind of proposal may be best for you and your creditors. The administrator will ask you to sign the required forms, which will then be filed with the Official Receiver, an officer of The Office of The Superintendent of Bankruptcy.

What happens after a proposal is filed with the Official Receiver?

Within 10 days after filing your proposal with the Official Receiver the administrator is required to send the Official Receiver a report. The report contains the administrator's opinion about whether the proposal is fair and reasonable and whether he or she believes you will be able to perform it. It also contains a list of your assets and debts, and a list of your creditors.

At the same time, the administrator must send to each of your creditors a copy of your proposal and a copy of the report on the proposal. The administrator will ask the creditors to accept or reject the proposal. The administrator will also provide information about calling a meeting of creditors.

How does a proposal get accepted?

Your creditors will have up to 45 days to consider whether to accept or reject your proposal. A creditor may send a note to the administrator accepting or rejecting the proposal. If creditors do not respond, they will be considered to have accepted the proposal. If a sufficient number of creditors accept the proposal, then it will become binding on you and your creditors, and you will have to meet its terms.

What happens if the proposal is rejected?

If the proposal is rejected, you will no longer be protected by the Act. The administrator will, within 5 days, notify you, all your creditors and the Official Receiver of this fact. Your creditors will now be able to take legal steps to recover their debts from you. If you were bankrupt when you made this proposal, the administration of your bankruptcy will continue.

What if my proposal is accepted and I fully meet the terms?

When the proposal is fully performed, the administrator will give a certificate of full performance to you and the official Receiver and you will be relieved of the debts that were covered by the proposal.

What if I stop making payments and default on the proposal?

If you fail to keep the terms of your proposal, it may be annulled. If you were insolvent prior to making the proposal, you return to the same situation and your creditors would have a claim against you for the amount owed to them before the proposal, minus any amount you paid then during the proposal. If you were bankrupt when the proposal was made and the court subsequently annuls your proposal, you will be considered bankrupt on the date of the annulment.

Does it cost anything to make a proposal?

Yes. There is a filing fee to be paid to the Superintendent of Bankruptcy and the administrator is entitled to be paid, normally out of monies paid by you under your proposal.

There are two types of Proposal an individual can file:

	Consumer Proposals	Division I Proposals
Who proposal is available to	Debtors owing only consumer debt amounting to less than $75,000, excluding a mortgage on the principal residence.	Debtors who have personal or business debt. There is no dollar limit on the amount of debt.
Stay of proceedings	Proposal stays all legal actions undertaken or contemplated by unsecured creditors.	Proposal stays all legal actions undertaken or contemplated by unsecured creditors.
Term	Cannot be for a term of more than five years.	Can be for any term that makes economic sense.
No. of counselling sessions required	Two	None
Period for acceptance of proposal by creditors	Deemed to be accepted after 45 days if creditors do not dissent or call for a creditors' meeting.	Creditors vote at a creditors' held in 21 days.
Period for court approval of proposal (after acceptance by creditors)	Deemed to be approved after 15 days following creditor acceptance if there is no request to take the proposal to court for approval.	The trustee applies for court approval expeditiously, usually within three weeks.
Creditors' meeting	Held if requested within 45 days of the filing.	Held approximately three weeks after the proposal is filed .
How proposal is accepted or rejected	It is either deemed to be accepted after 45 days (see above) or if creditors ask for a meeting, it is accepted by a simple majority of the dollars voted.	At least 66.67 percent (2/3) in dollars and 50% plus one in number of eligible creditors who vote must approve.
What happens if proposal is not accepted or approved?	Debtor cannot make another consumer proposal. Note that the debtor is not automatically bankrupt if the consumer proposal is not accepted. Stay of proceedings is lifted.	Debtor is immediately bankrupt effective on the date of the creditors meeting.