Will My Bank Accept A Consumer Proposal?
Every year our company files thousands of consumer proposals for our clients. We are among the largest consumer proposal administrators in Canada, which is why we have an interest in what the different creditors will look for in these proposals.
I often meet with the representatives of the biggest banks in Canada. These conversations might revolve around specific scenarios, but in general, I use these opportunities to ask them how they make the decision to accept consumer proposals.
Why is it so important that I stay updated on what the different banks feel about these proposals? Because the institution you are banking with will probably be one of the largest creditors in your consumer proposal.
I recently reviewed many of our previous filings to find the biggest creditors that have filed claims for “unsecured” debts in the proposals to display how substantial bank claims tend to be in Consumer Proposals on average.
The largest creditors present in consumer proposals according to an aggregate were:
- Canada Revenue Agency
- TD Bank
- RBC (Royal Bank)
- BMO (Bank of Montreal)
- Capital One
- Canada Tire
- National Student Loans Canada
This list might slightly change from one year to the next, but it is clear to see that all the banks in Canada are featured in the top 10.
Each creditor will vote on a proposal. The amount of votes they will get is according to the dollar value total of the debts that are owing. So, when CIBC or TD Bank, or Royal Bank is the largest creditor you have, this institution will have a dramatic impact on whether your consumer proposal fails or passes.
Banks will evaluate proposals according to their merit. The banks will base a decision according to a vote against or for proposals by reviewing the details pertaining to each person’s case.
Consumer proposals are negotiated settlements between the debtor and all their creditors. The main advantage of these proposals is that the individual can hold onto their assets, which they would have had to surrender if they choose the option of bankruptcy. However, you are required to pay out the value of your secured assets to each of your creditors.
So How Do You Go About Getting Your Bank To Accept Your Proposal?
Banks review proposals to make sure the proceeds from the proposal exceed the amount they might have received in bankruptcy. Creditors are not that likely to accept deals that will pay them 12 cents to every dollar when bankruptcy will provide the bank with 17 cents on every dollar.
Banks also want to ensure a proposal is fair and reasonable. If they believe you could be offering more, they might ask for a higher payment. No one would want to end up paying an amount to a proposal that they cannot afford, but the banks also want to make sure they are getting an offer that is reasonable.
At Risman Zysman, before we file consumer proposals on behalf of our clients, we will review their budget to come to a payment that you will comfortably meet every month. We only submit proposals that are affordable to our clients and the ones that the creditors will most likely accept.
Your bank or banks will review your proposal budget. They will also look at all the expenses that you have included and any household income to decide if the offer appears reasonable enough to them.
Keep in mind, that all creditors are different, and some of the banks will have a minimum “acceptable range” when it comes to recovery. Some banks expect to recover 25%, while others will want one-third. Some won’t have these set limits in place. Our company has filed thousands of proposals over the last few years, and we now have experience with what creditors, which includes the large banks, expect.
At Risman Zysman, we take every factor into consideration to make sure the consumer proposal that you are going to offer will work financially for you and will also be as acceptable as possible to your creditors. This is the reason why our company has a 99% acceptance rate when it comes to all the proposals we have filed.
If your debts have reached a point where you cannot keep up with your monthly payments, you may want to choose the option of a Consumer Proposal to help you deal with all your creditors. Call us today for your free consultation.