Proposal over $75k
I have recently decided to make a consumer proposal. I owe approx. 80k. Should I try to pay my debt down to 75k so I can make a standard consumer proposal? What are the advantages and disadvantages of making a standard consumer proposal vs. a proposal for over 75k?
Thanks
The two proposals are largely similar, but the biggest differences are:
1. In a Division I Proposal there is an automatic bankrutpcy provision (i.e. if your proposal is rejected or you default on the proposal you are automatically in bankruptcy). Although, I believe this is largely a technical difference as a most situations where a consumer proposal is rejected or defaulted on most people end up filing a bankruptcy anyway.
2. The creditors have a shorter time to vote on the proposal (21 days vs. 45);
3. Requires a higher percentage of support from the creditors to pass (50% in number and 2/3 in value vs. a simple majority).
Despite these differences in practice we don’t find many changes in the process. The Division I Proposals are typically accepted just as often as the Consumer Proposal and the adminsitration costs are laregly similar as well.
The only thing I would caution you on is if you try to reduce your debt prior to filing a proposal you may actually be creating more problems for yourself as your creditors may view these payments as preferential. As a result you are likely better off to simply file the proposal under Division I of the act and not take that chance.