A proposal is a contract between a debtor and his creditors. It settles the creditors' rights, if there are differences in priorities or treatment amongst them. It becomes a binding contract, to the extent of the aforementioned priorities and treatments, amongst the creditors themselves. They enter into the contract by voting on it and either "assenting to it or defeating it."
A proposal is better for individuals and companies that wish to avoid bankruptcy.
Individuals may avoid having to liquidate assets and companies can avoid shutting down and continue on in business.
Filing a proposal has a number of immediate advantages for an individual under siege by his creditors.
The filing of a proposal stops all legal actions undertaken or contemplated by unsecured creditors.
Filing gives the debtor some "breathing space" so that he can approach creditors to explain his financial situation and ask for support.