Renegotiate your Proposal.

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March 27, 2023

Renegotiate your proposal after it has been filed.

Renegotiating proposals is always a possibility. At the time of filing a proposal “an offer” is made to the Creditors that they may either accept or reject, retaining the option to renegotiate. Creditors rarely throw out the baby with the bathwater, by completely rejecting a proposal offering, they are far more likely to push back on the initial offer asking for more money to be repaid.

Your LIT’s job is to be something of an arbitrator between the debtor and their creditors, using the LIT’s experience and skill to assess the most viable offering that will be mutually beneficial. Proposals serve two functions, the first is to help the debtor resolve pressing debt issues, the second is to recover as much as is reasonably available to the crdeitors through the process. The majority of proposals are approved based on the initial offering, but some are renegotiated.

Once in place, the proposal becomes binding on both parties Debtor(s) and Creditor(s). However, financial changes may happen that require a readjustment and revaluation of the proposal, these are called “material changes“. Material changes include, among other things, a loss of a job, a marital breakdown, a death or illness in the family, the failure of a small business or some other catastrophic change that requires a redress of the original terms, in order for thr proposal to be completed.

Timing is imperative, it is important that you notify your LIT immediately of the material change and discuss with them the likelihood of completing the proposal in accordance with the original terms. If that is not possible, your LIT can help you to craft an “Amended Proposal” that may be presented to your Creditors at a Creditor’s Meeting. If your Creditors agree to the amended terms, you can resume making adjusted payments accordingly.

This same strategy applies equally to Division Two (Consumer) Proposals and Division One (usually Corporate) Proposals.