b'THE CONSUMER PROPOSALprofessionals, expanded financial criteria, and widespreadThe proposed amount relative to family obligationspublicity about its benefits. The positive aspect of offeringmust be reasonable. the consumer proposal to financially struggling debtors as anThe debtors family budget needs to retain a surplus alternative to bankruptcy or as a way of avoiding bankruptcy entirely has certainly encouraged its use.for contingencies after making debt repayment instalments. In addition, the situation of near-full employment in CanadaDebtor payments need to take into account debtor-affected the composition of insolvency files, while easier access to credit (resulting in higher indebtedness), the existence of debtorsincome stability and/or fluctuations.with significant surplus income that they would have had to payThe proposal must generate more proceeds under a bankruptcy scenario to the detriment of their familythan bankruptcy. budgets, and longer repayment periods were other factors that The debtor must be ready and willing to participate in drew more debtors to consumer proposals than to bankruptcy.Another factor was the arrival on the scene of financial advisorsa process that can last up to five years. and/or financial recovery service providers who heavilyAfter more than 25 years, success still depends on these factors.promoted the consumer proposal option to solve their clientsThe infatuation with consumer proposals since 2009 and the debt problems. However, it is important to realize that theseexpanded financial criteria have also resulted in new situations as intermediaries are not necessary and that licensed insolvencywell as problems that will definitely require further amendments trustees are in the best position to evaluate the financial situationto the Bankruptcy and Insolvency Act in the future.of consumer debtors and advise them on the most appropriate way forward. For example, what about clarifying the possibility of a lower tax burden in consumer proposals in terms of income and other taxes, as is currently the case in personal bankruptcies? This idea of a lower tax burden for insolvent debtors or otherwise has .the situation of near-full employmentswung back and forth over the past 25 years, depending on the particular jurisprudence in each Canadian province, without in Canada affected the composition ofresulting in a clear position.insolvency files, while easier access toWhat about the apparent gap regarding the qualification to vote of a secured creditor who chooses to vote on a consumer proposal credit (resulting in higher indebtedness),even though the proposal was made to the unsecured creditors? the existence of debtors with significantWhat about individuals in business who qualify for a consumer proposal and whose wages are late in being paid? After all, the surplus income that they would havefederal Wage Earner Protection Program is not recognized in the consumer proposal context.had to pay under a bankruptcy scenarioAs for the refusal of the tax authorities to participate in the procedure when there is a deemed trust, nothing is clear in the to the detriment of their family budgets,Bankruptcy and Insolvency Act.and longer repayment periods wereFinally, concentrated voting power is threatening the democratic nature of the procedure. Many institutional creditors now rely on other factors that drew more debtors tonational firms to deal with their claims and to vote on proposals on their behalf, thereby rendering debtors vulnerable to these consumer proposals than to bankruptcy. firms joint positions as opposed to a vote by eachinstitutional creditor.Despite these issues and on a more positive note, lenders are beginning to recognize the benefits of the procedure and the As of February 28, 2019, consumer proposals represented 56.6efforts made by consumer debtors who choose the consumer per cent of all consumer insolvency files, a 10.5 per cent increaseproposal option to address their financial difficulties, thereby over the same period last year. However, it would be interestingopening up the possibility of obtaining credit even before the to know the completion rate of consumer proposals these days procedure is complete. a fair guess would be that it has declined!Could it be that the advantages of the consumer proposalThe consumer proposal has evolved over the past 25 years and instead of bankruptcy as a means of solving consumers financialhas adapted to the ever-expanding insolvency and credit market. problems have been overestimated?Nonetheless, as new issues emerge it is likely that furtherreforms to the Bankruptcy and Insolvency Act will enhance the The chances of a consumer proposals success are based on severalrole of the consumer proposal as a financial restructuring tool for key factors: consumer debtors.RS Volume 19 Issue 2 Rebuilding Success 43'