A Trustee’s Perspective
Let’s talk about a Trustee’s perspective on the difference between a proposal and a bankruptcy filing. Trustee’s are businesspeople, like other entrepreneurs Trustee’s are in the business of making money. There are limited ways any business can make money, it can increase sales, decrease costs or do a combination of the two.
From a Trustee’s perspective proposals are more cost efficient that bankruptcies. Most of the Trustee’s work is performed at the beginning of the proposal, there is an initial consultation and valuation of property, document preparation and signing, occasionally a creditors’ meeting and a subsequent report to the Official Receiver and the debtor must attend at two counselling sessions. Beyond that the Trustee (Administrator) receipts, deposits and distributes money.
A bankruptcy filing requires the same initial process of an initial consultation and valuation of property, document preparation and signing, occasionally a creditors’ meeting and a subsequent report to the Official Receiver and the debtor must attend at two counselling sessions. Additionally, the Trustee must also monitor the bankrupt’s income and expenses each month, prepare and file outstanding income tax returns, attend at Court for discharge hearings and revalue property at the end of the administration before the bankrupt can be discharged.
All in all, from a Trustee’s perspective bankruptcies involve significantly more work and can result in clients becoming irate regarding changes in their situation, such as income increases, that must be addressed by the Trustee. In proposals, once everything is in place the payments are set and not (usually) variable, making communication easier for the debtor.
Don’t get me wrong, proposals are great options for some people but given a choice would you rather sign up for 10 or 20 hours of work if you knew the pay was the same? Although the Trustee is required to be “neutral” in all his dealings it is easy to see where that might not always be the case.