Tuesday, 29 September 2015

Role of Consumer application and proposal

A consumer proposal is actually a settlement with creditors. Debtors provide a proposal to the creditors, who negotiate over the terms and the repayments or the amount of the debt written off. This is the formal procedure that is governed by the insolvency act, and bankruptcy. It is available to those who have or whose total debt is not beyond $250000 and this does not include debts that are secured by their principal residence. The negotiations and the consumer proposals are undertaken by a trustee in bankruptcy. The outcome is affected by negotiation.
Steps undertaken while filling a consumer application
Outcome affected by negotiation like debt amount, employment situation, assets owned by the debtor. Generally, there are 50 to 80 percentages of the debts that are written off, and the balance that remains is spread over 3 to 5 years of the time period which is paid in monthly installments. Consumer proposal have advantages like all the assets can be retained by the debtor, there can be actions against them by the unsecured creditors, there can also be wage garnishments and they can solve their debts problem without involving or informing or declaring bankruptcy.
Consumer must take care of steps like debtors must find a qualified company who have trustees and work with the trustee so that they can administrate the application and present before the creditors. They should work like the company and associations like Collins Barrow Brown that provide support for consumer proposal. Also, the trustee can file the applications and that time the debtors can stop paying to the creditors and hence no payments will be received by the creditors as this is included in the proposal. The proposal will be submitted by the trustee in case of any financial difficulty if arises to the debtors. The creditors have one and half month to reject or accept the debtor’s proposal. Accepting the proposal then all the obligations must be fulfilled by the debtor. Hence, the debtor will be legally released when they meet conditions are full.

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