Consumer Proposals

Consumer Proposals in BC: Alternative to Bankruptcy

What is a consumer proposal?

Consumer proposals in BC are an alternative to bankruptcy and a way to negotiate a debt settlement with your creditors. It is an offer made by a debtor to either defer and/or compromise amounts owed to his or her unsecured creditors.

For example, you could propose that you will pay a reduced amount each month, but over a longer payment period. Or you could propose that your creditors be paid only a percentage of what you owe them through a consumer proposal. Depending on the circumstances, this percentage could be as low as 20% to 30% of the total debt outstanding. A proposal can also consist of a single lump sum compromise payment to be made either by a third party contributor (e.g. family member or friend) or from the liquidation of an existing asset.

What are the benefits of a consumer proposal?

The benefits include the following:

  • It allows you restructure and/or reduce your financial obligations and also avoid bankruptcy at the same time.
  • You only need the support of 50% plus $1.00 of the dollar value of unsecured voting creditors in order for the proposal to be accepted and binding on all your unsecured creditors.
  • It is an effective alternative to bankruptcy from the aspect of its effect on your credit rating: with a proposal your credit rating is not as adversely affected as in a bankruptcy.
  • Your unsecured creditors will no longer be able to take legal steps to recover their debts from you (such as seizing property or garnisheeing wages) unless the proposal is withdrawn, rejected or annulled.

Who can make a consumer proposal?

A consumer proposal can be made by any person who is insolvent and whose debts are less than $250,000 (excluding a home mortgage). If the debts are more than $250,000, the proposal must be made under Division I of Part III of the Bankruptcy and Insolvency Act.

It is possible to make a joint consumer proposal. Two or more consumer proposals may be joined where they could reasonably be dealt with together because of the financial relationship of the debtors (i.e. a large percentage of common creditors) and the total debts do not exceed $250,000.

Does it cost anything to make a consumer proposal?

The payments you agree to make in a consumer proposal are the only payments you will make. However, the trustee, who acts as the “administrator” of the proposal, is permitted to withdraw a portion of the funds available for the creditors in order to cover his fees. The amount of fees allowed are prescribed by the Bankruptcy and Insolvency Rules which may be found at the website of the Superintendent of Bankruptcy.

Further Information

Our professionals offer free consultations to British Columbia residents considering a consumer proposal. We will answer all your questions about this important alternative to bankruptcy, and explain any other options available to you that can help you avoid bankruptcy. To arrange for your initial consultation, please contact our British Columbia bankruptcy trustees office closest to you. In addition, if you prefer you can also send us an online request for a Free Case Evaluation.