Yes, you qualify for a consumer proposal if you meet the following criteria:
1) You owe at least $1,000 to your creditors. While this is the minimum required by law, Welker and Company doesn’t typically recommend consumer proposals to people with less than $10,000 in debt. Also, the proposal process is more in-depth when you owe more than $250,000 (excluding mortgages or secured lines of credit).
2) The settlement that you propose to your creditors is better than what they would receive if you declared bankruptcy. This is also the law and is a consideration when formulating every consumer proposal.
3) You have to be able to afford your proposal. At Welker and Company we don’t like to set people up for failure. It’s fine and good to make a proposal and have it accepted, but it isn’t worth the paper it’s written on if your monthly budget doesn’t allow you to make the payments.
A consumer proposal must be accepted by the people you owe. Therefore, you need to be able to offer or propose enough money to satisfy them. As a rule of thumb, creditors typically require clients to pay at least 33% of what they owe. That amount can than be divided by as many as 60 monthly payments (a consumer proposal can’t be longer than 5 years).
As an example, John owes $50,000 to a number of creditors. His creditors are likely to accept an offer of $275 per month for 60 months. This represents $16,500 or 33% of what John owes.
When considering a consumer proposal, it’s really important to make sure that you’ll be able to afford the required payments. When the required proposal payments are unaffordable, our Licensed Trustees in Bankruptcy consider the option of filing for bankruptcy.