An informal proposal is a proposal that you can make to your creditors using a Trustee as an intermediary, but not pursuant to the formal proposal provisions of the Bankruptcy and Insolvency Act. The advantage of a informal proposal is that it may not affect your credit rating as adversely, or for as long as a bankruptcy or formal proposal might, and it may be significantly less costly than a formal proposal since the Trustee does not have the same administrative tasks to perform in an informal proposal.

  An informal proposal is usually beneficial where there is only one major creditor, or a very few number of creditors. In an informal proposal, The Trustee approaches your creditors on your behalf and tries to help arrive at some reasonable settlement in order to avoid a formal proposal or a bankruptcy. The major difference between an informal proposal and a formal proposal is that there is no stay afforded to the debtor unless the creditors unanimously accept the proposal. In other words, any creditor who does not accept the proposal is free to pursue the debtor independently. In a formal proposal however, only a requisite majority of creditors are required to accept the proposal, and any creditors that dissent are bound by the terms of the proposal and can not pursue the debtor independently.