“How much?”. It’s one of the most important questions that people want answered when considering a consumer proposal.
Unfortunately, there is no “one size fits all” answer. While a number of factors can affect the amount that you need to offer your creditors through a consumer proposal, the most important factor is: What would they receive if you declared bankruptcy? Federal law requires that every proposal is better for the creditors then a bankruptcy.
That’s why Trustees always consider bankruptcy first, even though we think of it as a last resort.
Two things affect the “value” of your bankruptcy to your creditors:
1) Surplus Income. If you declare bankruptcy, then the more you earn, the more you pay. For more information on Surplus Income, click here.
2) Assets / What you own. If you owe $100,000 and have a $50,000 RV, then it’s unlikely that your creditors will accept a proposal of $30,000 since you’d be forced to surrender your RV in a bankruptcy and they’d receive $50,000 less fees.
Your Trustee in Bankruptcy will calculate the “value” of your bankruptcy first, and your minimum proposal value second, before considering your ability to afford the proposal.
Certain creditors will reject proposals that don’t repay at least a minimum percentage of your debt. For example, a creditor may reject a $10,000 proposal on $100,000 of debt even though it is more than they would receive if you declared bankruptcy simply because they believe that it is too low and you can afford to pay more. Generally speaking, creditors like to see approximately 33% of your debts repaid.
Once the amount of your proposal has been determined, we typically spread your proposed repayment over 60 monthly payments. For example, if you’re offering $18,000 as settlement of $50,000 in debt then you’d make 60 monthly payments of $300 to your Trustee. Your Trustee’s fees are included in these payments. These fees are regulated by the Federal Government (read more here).
Welker and Company’s Trustees in Bankruptcy will review your situation, and explain the cost of a consumer proposal to you for free. While it can be done over the phone, we recommend a private meeting in which we can sit face to face and work through your financial situation together.
While most people hesitate to contact a Trustee, the vast majority leave our offices relieved after understanding their options. If you have a question, large or small, send us an email or give us a call. We’d love to hear from you. What are you waiting for? You’ve got nothing to lose except your debt!