Proposals are popular – almost 80% of insolvency filings are proposals

consumer proposal report
May 18, 2022

Proposals are popular, in fact proposals are a far more popular choice among Consumers than bankruptcies, and there are many reasons for that choice including: 

  • Avoid the stigma of filing a bankruptcy.
  • Creditors prefer proposals.
  • Agreed reduction in monthly payments.
  • Stable monthly payments.
  • Option to pay out early.
  • LITs (generally) prefer administering proposals.
  • Property of the Debtor remains in the Debtor’s control.
  • Payment amounts can be renegotiated due to a material change.
  • Shorter term of reporting on a credit report.
  • Reduced paperwork for Debtor and LIT.
  • No interest or other sundry costs.
  • Flexibility to increase payments and shorten term.

Proposals weren’t always as popular as they are today, there was a time when Creditors either rejected them altogether or pressed harder for renegotiation.  At one time LIT offices had to follow up each proposal with phone calls to Creditors to explain how the proposal was more beneficial to them.

Back in the day, some Creditors reasoned “why should we agree to reduce the amount we will receive from the proposal”.  Gradually as Creditors came to understand that proposals offered more money than bankruptcies, they became more acceptable.

These days Creditors have far more familiarity with all insolvency processes.  The majority of mainstream Creditors (banks, and major credit card issuers) use third party companies to process their insolvency claims.  The third party agents are given threshold values for acceptance of proposals. 

When the Creditor is a minor stakeholder, they may abstain from voting on the proposal, or they may accept it without question.  However, when the Creditor is a major stakeholder they are more likely to push back on the initial proposal offering.

Debtors filing proposals are often those to whom the Surplus Income guidelines of Directive 11R can be applied.  Surplus income payments may go up or down as the Debtor’s income fluctuates.  Filing a proposal locks in the payment amount to a minimum regular payment amount.

Call us to find out of a proposal is right for you and your family 519-646-2222