Consumer proposal vs Bankruptcy – a creditor perspective

May 9th, 2008 by Questions

As a creditor , should I be suspicious of any debtor who files a consumer proposal instead of bankruptcy?

What is the advantage , to a honest debtor , of proposing a settlement when he can walk out of the debts in nine months by declaring bankruptcy?

Either he has significant assets , significant surplus income , expects a windfall in the next twelve months or expects a significant improvement in wages in the same period if a proposal is to be better than a bankruptcy. All of which should make the creditor refuse the proposal.

What other benefits does a honest debtor get in a proposal? His credit is already poor and a bankruptcy won`t affect his job except in a very narrow set of circumstances.

Posted from: Ontario

Questions

One Response to “Consumer proposal vs Bankruptcy – a creditor perspective”


, Barton Goth GCO Bankruptcy Trustees said:

As a creditor there is no need to be suspicious. The way a proposal is to be crafted is to simply offer the creditors more than they would get in a bankruptcy. So typically all the informaiton that would pertian in a bankruptcy should have been discussed by the debtor with the trustee, any assets should have been adequately valued and the proposal should provide a greater benefit to the creditors. If you are aware of something that hasn’t been reflected in the proposal and you have reason to believe that as a creditor you would receive more if the debtor files a bankruptcy then this is something you should make known to the trustee.

The advantage to a debtor is it has a reduced impact on their credit, sets a fixed payment so they know exactly what has to be paid, stops any collection pressure that may be making it difficult to concentrate at work, removes any garnishee’s and either reduces the total debt level to make the payment more manageable for the debtor or extends the time they can pay over.

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