Consumer proposals are, in effect, proposals for the elimination of a certain part of the debts of an individual on the verge of bankruptcy. They must be framed with the help of a consumer proposal administrator who draws out a legal framework for the procedure. These proposals are legally binding and hence they must be formulated very carefully. A consumer proposal has to be voted in favor of by the creditors before a part of the debts is waived off. Only a part of the debts are usually written off, but negotiations are always possible.
- Consumer proposals can only be made by people who fulfill a certain criteria. That must be kept in mind while framing a proposal.
- Details of income and assets must be stated in order to prove one’s eligibility for a debt waiver.
- In most cases, only unsecured debts can be included in a consumer proposal and this must be kept in mind while drafting a consumer proposal. All the debts of the individual must be clearly specified as it is will involve the law if approved; a consumer proposal must include factually correct information.
There are distinct advantages of consumer proposals. If such a proposal is rejected, a person is declared bankrupt. While that is not desirable in the first place, consumer proposals lend a degree of clarity as to exactly what monthly payments are required to pay off a debt. However, because they have to be approved by all creditors associated with the individual, they have to sound convincing and impressive.