AB; Alberta Personal Proposals - Avoiding Bankruptcy.

This presentation outlines the steps involved in a Consumer Proposal.

A proposal allows you to avoid bankruptcy, while paying off only a portion of your debts.

Under the Bankruptcy and Insolvency Act, a trustee files a Proposal or an arrangement between you and your creditors to have you pay off only a portion of your debts, extend the time you have to pay off the debt, or provide some combination of both. To be acceptable, your creditors must be better off under a Proposal than if you go bankrupt.

There are two types of Proposal an individual can file:

	Consumer Proposals	Division I Proposals
Who proposal is available to	Debtors owing only consumer debt amounting to less than $75,000, excluding a mortgage on the principal residence.	Debtors who have personal or business debt. There is no dollar limit on the amount of debt.
Stay of proceedings	Proposal stays all legal actions undertaken or contemplated by unsecured creditors.	Proposal stays all legal actions undertaken or contemplated by unsecured creditors.
Term	Cannot be for a term of more than five years.	Can be for any term that makes economic sense.
No. of counselling sessions required	Two	None
Period for acceptance of proposal by creditors	Deemed to be accepted after 45 days if creditors do not dissent or call for a creditors' meeting.	Creditors vote at a creditors' held in 21 days.
Period for court approval of proposal (after acceptance by creditors)	Deemed to be approved after 15 days following creditor acceptance if there is no request to take the proposal to court for approval.	The trustee applies for court approval expeditiously, usually within three weeks.
Creditors' meeting	Held if requested within 45 days of the filing.	Held approximately three weeks after the proposal is filed .
How proposal is accepted or rejected	It is either deemed to be accepted after 45 days (see above) or if creditors ask for a meeting, it is accepted by a simple majority of the dollars voted.	At least 66.67 percent (2/3) in dollars and 50% plus one in number of eligible creditors who vote must approve.
What happens if proposal is not accepted or approved?	Debtor cannot make another consumer proposal. Note that the debtor is not automatically bankrupt if the consumer proposal is not accepted. Stay of proceedings is lifted.	Debtor is immediately bankrupt effective on the date of the creditors meeting.

Reasons Why a Personal Proposal may be a Better Choice than a Bankruptcy.

Proposals must provide a better result to creditors than a bankruptcy. Otherwise, there is no reason for creditors to vote in favour of the Proposal. Note, however, that a "better" result can stem from a quicker distribution, lower costs of administration and a certain outcome of issues that may otherwise be contentious.

Proposals are particularly useful in the following situations:

Where the insolvent desires a "certain" result or a quick resolution and is prepared to pay a premium to achieve that result;
Where discharge is likely to be contentious or a substantial condition is likely to be imposed;
Where the insolvent finds bankruptcy unacceptable;
Where the insolvent wishes to continue in business and will be prevented from so doing if obliged to disclose that he is a bankrupt when dealing with third parties;
Where professional accreditation may be lost or put at risk by a bankruptcy;
Where a bankruptcy will result in a secured creditor acting on its security;
Where the insolvent wishes to retain some key asset (e.g. a home, heirloom, secret process or impending inheritance);
Where the insolvent has previously been bankrupt.