If you’re having trouble paying your debts, you usually have two choices – a consumer proposal or bankruptcy.
A proposal has many benefits over a Bankruptcy, including the fact that you can keep your assets versus having to liquidate them to pay your creditors. Do banks even accept consumer proposals or would they rather you file bankruptcy?
The truth is that banks do accept consumer proposals in many cases. They are often more favourable to the bank than bankruptcy.
Bankruptcy vs Consumer Proposal
From a bank’s perspective, bankruptcy is much worse than a consumer proposal. With a Bankruptcy, most banks walk away with little to nothing. You are insolvent, which is why you are filing bankruptcy, so there usually isn’t much left for most creditors or at least those that aren’t a high priority.
With a consumer proposal, though, banks get their fair share of payment. You’ll make payments for up to 5 years, which leaves a lot more time and room for more payments. A Bankruptcy, on the other hand, is usually over within 9 months with little to no money for the bank.
Banks have Control
Another reason banks prefer the consumer proposal over bankruptcy is they have more control. With a Bankruptcy, everything is court-ordered. Banks don’t have a say in anything and they have to abide by whatever orders are made.
Banks usually just have to accept the terms or ask to oppose the discharge. If they want to counter the terms, they have to petition to extend the Bankruptcy term which costs them more money and time.
With a proposal, banks have voting rights. They can say ‘yes’ or ‘no’ to the proposal. If at least half of your creditors vote ‘yes,’ then the proposal is deemed approved. Banks have 45 days from the date you file the proposal to vote.
Banks also have the option to ask for a certain amount of the debt owed to them. They typically keep it reasonable though because if they ask for too much, you may file bankruptcy instead. But, this control gives banks more hope that they’ll see at least a portion of what you owe rather than walking away with nothing.
How to Get a Bank to Accept your Proposal
Most banks accept a consumer proposal. If you want to increase your chances of them accepting it, here are some simple steps.
Offer as much as you can Afford
Banks can tell when you’re trying to pull a fast one. If you are offering too little, they may not accept your offer. Instead, be reasonable and show that you want to make good on your debt. A proposal isn’t a way to get out of your debt, but instead is a way to make it easier to pay all your debts when your income decreases or another life issue gets in the way.
Offer More than the Bankruptcy would Offer
If your banks would get something from your bankruptcy, make sure your proposal is more attractive. If you know how much a bankruptcy would pay the creditor, make sure your proposal is for more. If you aren’t sure, working with a qualified debt consultant can help you determine which option would be best and know which offer they’d accept.
Work with a Qualified Debt Expert
Sometimes it’s impossible to tell what a bank would accept. For example, some are fine with 25% of what you owed and others want a much higher percentage.
At EmpireOne Credit, our debt experts have worked with thousands of individuals, helping them to decide what option is best for them. Trying to figure it out on your own can be time-consuming and unsuccessful.
Banks know they can give consumers the runaround, making you promise more than you can afford to pay. This is where a debt expert can help you to reduce your debt by up to 80% and stop all interest.
What to do When a Bank Won’t Accept your Consumer Proposal
If a bank won’t accept your consumer proposal, it’s easy to feel defeated. They won’t take your offer so you can counter-offer and if that is voted against also, there is one other option – bankruptcy.
Is filing bankruptcy the end of the world?
It is not, but it would be easier to have a consumer proposal on your record versus the Bankruptcy. But, if you have too many creditors that vote ‘no’ to your proposal, you may not have a choice.
If you can’t get your proposal approved, we have other options. Our credit counsellors will work with you to determine if you can’t pay the debt back according to the banks’ terms, then we’ll help you to file for bankruptcy.
Thinking about giving up on your debt can be upsetting, but sometimes a fresh start is what you need.
Filing a consumer proposal or even bankruptcy isn’t the end of the world. It just means you need a fresh start and to pick up the pieces again. While a proposal is a lot easier on your credit and you get to keep your assets, it does mean that you’ll pay a percentage of what you owe to your creditors.
No matter what happens, the professionals at EmpireOne are always by your side. We’ll help you figure out what steps you should take or which option is best for you to get out of debt and move on with your life.