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6 Key Things You Need To Know About Consumer Proposals

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If you are struggling with debt, you may be considering a consumer proposal. This is a great option for people who want to avoid bankruptcy. However, there are some key things you need to know about consumer proposals before you make a decision. In this article, you will learn about the six most important things you need to know about consumer proposals!

It Will Save You From Bankruptcy

The main perk of this process is the fact that your wealth is actually well-protected. It’s known that a consumer proposal can help spread out payments, protecting you from bankruptcy. You’ll be able to protect your assets such as your home and car, which is not the case with bankruptcy. This process can help you keep what’s yours while getting a handle on your debt.

If you’re looking into consumer proposals in Canada, know that they can be an excellent way to get out of debt and protect your assets. Keep these key things in mind, and always speak to a professional before making any decisions about your finances.

Reducing Debts

Saving money is always important, and your debts will be largely reduced through a consumer proposal. In fact, you may only have to pay back a percentage of what you owe, and the rest is forgiven. This can provide much-needed relief if you’re struggling to make ends meet each month.

It’s important to note, however, that a consumer proposal does not eliminate all of your debts. You will still be responsible for any secured debts, such as a mortgage or car loan. However, unsecured debts, such as credit card debt, can be forgiven through a consumer proposal.

If you’re considering a consumer proposal to help reduce your debt burden, be sure to talk to a licensed insolvency trustee. They can help you understand the process and whether it’s the right option for you.

A consumer proposal is one way to deal with reducing your overall debt load. If you are struggling each month to make ends meet, this type of arrangement may provide some relief. With a consumer proposal, unsecured debts, such as credit card debt, can be forgiven.

No Extra Fees

When it comes to payments, there are usually lots of extra fees. These are the following:

  • Setup Fees
  • Amendments
  • Monitoring
  • Upfront Payment

With a consumer proposal, you don’t have to worry about any of these fees. You also don’t have to make a large upfront payment. This makes consumer proposals much more affordable than other debt-relief options.

For example, let’s say you have $30,000 in debt. With a consumer proposal, you may only have to pay back $15,000 over a period of 60 months. This means that you would save $15,000 in interest and fees.

It’s Legal

This is a completely legal process governed by the Bankruptcy and Insolvency Act of Canada.  A consumer proposal can only be made by a licensed insolvency trustee.

When you file a consumer proposal, an automatic stay of proceedings comes into effect.  This means that your creditors are legally prevented from taking any collection action against you.

This includes wage garnishments, freezing bank accounts, and legal actions such as lawsuits or seizure of assets.  The stay of proceedings is in place until your consumer proposal is completed or terminated.

It’s Flexible

You also have a lot of flexible options when it comes to consumer proposals. You can decide how much you want to pay each month, and for how long. If your situation changes, and you can’t afford your payments anymore, you can always adjust your proposal.

For example, let’s say you originally proposed to pay $600 per month for 60 months. But after 20 months, you lose your job and can only afford $300 per month. You can go back to the trustee and change your proposal to reflect your new budget.

Or, let’s say things are going great, and you want to get out of your consumer proposal early. You can do that too! If you have a lump sum of money (maybe from a tax refund or an inheritance), you can use it to pay off your consumer proposal in full.

You Pay What You Can Afford

It’s important that you’re able to protect your assets and with consumer proposals, you’ll be paying only what you can afford. This is determined by your monthly income and expenses. You’ll work with a consumer proposal administrator to develop a budget and propose an affordable payment plan to your creditors.

If you’re unable to make the payments outlined in your consumer proposal, the court may declare the proposal void and order that your estate is liquidated.

Consumer proposals are essential in protecting you from bankruptcy, and they will reduce all your debts. You won’t have any extra fees in this completely legal move, which allows you a lot of flexibility. Finally, you will only be paying what you can afford, giving you a lot of leverage over time!

The New Bankruptcy Regime In Oman

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Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.

Prior to the recent passing of the Omani Royal Decree No 53/2019, Oman law contained limited legislation governing the area of bankruptcy.

The Commercial Law issued by the Royal Decree No 55/1990 and the Commercial Companies Law issued by the Royal Decree No 4/1974 and their related amendments continued to provide the framework for the bankruptcy of traders and liquidation of insolvent companies, until the passing of this new Bankruptcy Law.

This new law, which will come into effect from July 1st 2020, sees the formation of new progressive rules and regulations. These provisions will apply to traders with the aim of improving the methods and measures that are to be taken following a bankruptcy.

The key three provisions that have been introduced include the restructuring procedure, preventive composition, and bankruptcy.

1. Restructuring

A significant new provision introduced by the Bankruptcy Law includes the concept of restructuring. This is a brand new mechanism proposed for the traders in financial difficulties. Restructuring involves proceedings that may assist the trader debtor to overcome a financial and administrative disorder, by way of settling the debtor’s debts via a restructuring plan.

This is overseen by a restructuring committee, which is formed of experts that are registered on the Roll and are defined to include a sufficient number of persons, offices, and companies specialised in the restructuring field. The experts will be sought by the Competent Department at the Ministry of Commerce & Industry and required to examine petitions for restructuring and the handling of the petitioner’s assets.

This method is aimed to help prevent traders from going into liquidation, by way of creating a settlement of the traders’ debts with its creditors. The procedure enforces strict and fast deadlines and requirements for the petition to be accepted and can only be submitted where it is found that the debtor has not committed any act of fraud and has practiced the business continuously during the two years before the filing of the petition.

2. Preventive Composition

The second method includes Preventive Composition, whereby the trade debtor may apply for in situations when there is a disruption in the debtor’s financial situation, which is likely to lead into an interruption of the payment of the debtor’s debts. This method can be sought with the aim to achieve a settlement with creditors to avoid bankruptcy. Unlike the method of bankruptcy, creditors are unable to apply for a petition of Preventive Composition.

During the time of Preventive Composition, the trader can continue to administer the property and undertake acts in the everyday course of business. A composition trustee will be appointed by the court, who must help oversee the Preventive Composition process, such as the gathering of creditors and the publishing of the summary.

Where a Preventive Composition application succeeds, the Judge will require a majority vote of consent by the creditors, in which their approval must accumulate to two-third of the verified debts. For a secured creditor, they may not vote unless they give up their rights as secured creditors. In situations where the company has issued bonds or sukuks and the outstanding amount of bonds exceeds more than one-third of the total outstanding debts, the composition will require further approval from the general assembly of the holders of the bonds or sukuks.

3. Bankruptcy

The third method includes filing for bankruptcy. Any trader who may have stopped payment of his commercial debts due to the interruption of his commercial business may submit a petition in bankruptcy. For a petition to be submitted, it must be made within fifteen days from the date of cessation of payments and must include the reasons for the cessation and the appropriate documents, including statements of property and expenses. The Court may also prompt the decision of bankruptcy for a trader. Where a submission for bankruptcy is made, the trader company requires the approval of the majority of its shareholders.

Bankruptcy claims are examined by the Court, who will in turn, take precautionary measures against assets of the trader debtors to preserve the assets of the trader. The Court will also appoint a liquidator, who will be the official receiver to oversee the insolvency proceedings. They will be in control of overseeing the management of assets of the debtor trader.

The liquidator will also be in charge of publishing a summary of settlement in the Commercial Register and the invitation of creditors. They must ensure that the bankrupt person cannot manage or dispose of any property, pay any debts or retrieve any amounts that are owed to him.

4. Penalties

With the new Law, there is now enforcement of penalties for rejected petitions by the Court. In circumstances where the Court believes the trader has deliberately claimed bankruptcy, the petitioner can be found sentenced to a financial penalty.

The Law also enforces an imprisonment sentence, where they are found acting in bad faith, through methods of concealment, inducement or neglects to include a creditor.

Conclusion

The new Bankruptcy Law continues to promote investment in Oman, by helping to ensure transparency to both foreign and local investors. The New law will impact the working of companies by providing a base to seek a remedy in circumstances of bankruptcy, helping to provide more suitable conditions for companies to grow.

The new Law also enables debtors the opportunity to rehabilitate by being given the chance to pay all due amounts and expenses owed to creditors.