Consumer Proposals Are Voted on by Creditors
A consumer proposal is a good alternative to bankruptcy that allows you to pay off a portion of your debt and have the rest written off.
In order to do this, you must submit a proposed amount to your creditors, which must exceed the amount that they would get if you declared bankruptcy.
One of the biggest questions that we are asked by clients that are considering this option is, can a consumer proposal be rejected?
Your creditors do have the right to reject your consumer proposal, so it’s important that you understand what the process is and how consumer proposals are either rejected or approved.
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Review Period
Once your proposal has been put together and sent to your creditors, they will have 45 days to review the proposal and make a decision.
Along with the consumer proposal, each of your creditors will be sent a voting letter, which allows them to vote on whether they are willing to accept the proposal or not.
The creditors will then file a voting letter and a proof of claim with your trustee and their votes will be counted.
At the end of the 45 day period, your trustee will collect all of the votes and count them.
There are 3 potential outcomes at this stage; deemed approval, approval at a meeting of creditors or non-approval by creditors or by the court.
Deemed Approval
If none of your creditors submits a voting letter, they are deemed to have accepted your proposal because nobody has raised any concerns.
If voting letters have been received, your trustee needs to count them and determine the percentage of creditors that voted ‘no’.
If the total number of ‘no’ votes is less than 25% of the total value of the claims, your creditors are deemed to have accepted the proposal.
Meeting Of Creditors
If the ‘no’ votes comprise more than 25%, your trustee must hold a meeting of all creditors to come to a resolution.
In most cases, creditors will vote against a consumer proposal because they don’t think that amount of money that you propose to repay is high enough.
At the meeting of creditors, they will give you a counter offer and if you are willing to accept the new amount, a new consumer proposal will be drafted and accepted at the meeting.
Proposal Not Approved
If the meeting of creditors does not go well and you cannot come to an agreement about the amount of money that you should repay, the proposal will not be approved.
In this situation, you can either file a new consumer proposal with different terms that your creditors are more likely to accept or you can look into other debt relief options, like bankruptcy.
Hopefully, this has given you a good answer to the question, can a consumer proposal be rejected?
However, if you need more information about the process or you want to learn more about other debt relief options in case your consumer proposal is rejected, get in touch today.
You can reach us on the phone or fill out an evaluation form and we will get back to you.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal
