Consumer Proposal Payment Terms – More Examples
Examples – Part 2: Further examples of consumer proposal payment terms to help you understand how your proposal can be designed to fit your personal circumstances.
The “lump sum” consumer proposal
For people who have access to a lump sum of money, this is often the quickest way to deal with their debts. Let’s say you have $20,000 in savings (perhaps RRSPs). You might offer to cash them out and surrender the after tax proceeds to your creditors.
Example: A one time payment of $14,400 from the proceeds of cashing out your investments.
“Sell the house”
This is a variation of the lump sum. Basically, you offer your creditors a minimal monthly payment of $50 until such time as you sell your home and then you assign (offer) your creditors the net proceeds from the sale of your house.
Example: Offer to pay $50 per month for a maximum of 60 months or until such time as your homes sells, and offer your creditors 95% of the net proceeds from the sale of the house as a lump sum payment.
A person’s spouse dies and there are multiple life insurance policies in place. A lump sum proposal is offered assigning some (likely the majority) of the proceeds to the creditors, but allowing the surviving spouse to retain some portion of the funds on compassionate grounds.
Example: Two life insurance policies, one worth $50,000, the second $35,000. The debtors owe $75,000 in debts. The proposal offers the creditors the first policy. The second is disclosed, but not offered.
“Converting from bankruptcy”
Let’s say you’ve filed an assignment in bankruptcy and you suddenly you find yourself earning significantly more than you expected. If your income is high enough, you may incur very large surplus income payments. Instead of making those payments, you might offer your creditors a proposal to make a lower payment, but for a longer period of time. The creditors win because you will repay more money. You win because the payment can be set at a manageable level.
Example: You owe $600 a month in surplus income and your trustee advises you that your bankruptcy will run 21 months. Instead, you offer a proposal to pay $300 a month for the next 48 months to your creditors. If accepted, the bankruptcy is annulled (cancelled) and you proceed as if you’d always filed the proposal.