519-646-2222Renegotiating Existing Proposals
Renegotiating existing proposals is something that LITs approach with some reluctance – and understandably so. The LIT’s role in negotiating a proposal is to find the right balance point that lies between do-ability, by the Debtor, and acceptability, by the Creditor. Once that point has been found the goal is move smoothly towards a conclusion. But every once in a while something changes, loss of income, marriage breakdown, critical illness, death of a spouse and so on. At these times it may become necessary to renegotiate the existing proposal in order that it may be completed.
Time is one thing that cannot be changed without the blessing of the Court. The Bankruptcy & Insolvency Act requires that proposals be completed withing “five years” – but what exactly is five years? Some may argue that five years is a time span of sixty (60) months, others may think in terms of the end of the fifth year from a particular point in time. If I filed a proposal on June 1st of 2020 and was required to complete the terms withing five years from that time does that mean I have until June 30th of 2025 or until December 31st 2025 to complete the terms? In any event, there have been cases before the court wherein the Debtor was unable to complete the terms within the requisite time frame and the Courts have allowed the debt complete proposal regardless of that deficiency.
When renegotiating a proposal it is important to bring clarity to the table, a temporary layoff from work could result in a short term of acceptably reduced payments to bridge a short period of time, while a catastrophic event could result in a drastic reduction in the agreed payment arrangement. The renegotiation must be balanced between the interests of the parties and not weighted to offer the Debtor a pathway to a reduction based on some misleading information. After all, by the very nature of the Proposal the Debtor is receiving a significant advantage over paying their debts in full.
It is important to note that the Debtor cannot approach a different LIT to renegotiate an existing Proposal – that must be done by the Administrator who has carriage of the file.