The Frequency of Consumer Proposals Rejection: An In-Depth Analysis
The Consumer Proposal is a legal procedure regulated by the Bankruptcy and Insolvency Act. It allows individuals to make an offer to their creditors to modify their payment terms. However, a prevalent concern among many is: How often do consumer proposals get rejected?
A Glimpse into Consumer Proposal Acceptance Rates
In our experience, the rate of acceptance for consumer proposals stands at a staggering 95% or higher. This rate encompasses the initial acceptance within 45 days of filing the proposal and the subsequent acceptance of proposals that are initially rejected but later approved after renegotiations or amendments.
What Leads to Such High Acceptance Rates?
The high approval rate can be attributed to the presentation of consumer proposals that are reasonable to the creditors. They often include the terms and conditions that creditors usually desire. Creditors are well aware that if the proposal is not approved, the debtor might consider filing for bankruptcy, which would likely result in creditors receiving less than what the consumer proposal offers.
The Preferences of Creditors
To ensure a higher chance of acceptance, it’s crucial to understand what creditors typically look for in a consumer proposal. As the administrator of a consumer proposal, a Licensed Insolvency Trustee should prepare the following:
- A detailed statement of affairs of the debtor.
- An estimated statement of the debtor’s household income and living expenses.
- The consumer proposal with the debtor’s offered amount and the terms of payment.
- An Administrator’s report providing a recommendation and justification for the creditors to accept the proposal.
These documents are essential for creditors to make an informed decision.
The Role of the Licensed Insolvency Trustee
The Licensed Insolvency Trustee plays a crucial role, acting as the administrator of the consumer proposal. The trustee’s responsibilities include:
- Preparing a thorough statement of the debtor’s affairs.
- Estimating the debtor’s household income and living expenses.
- Drafting the consumer proposal and detailing the debtor’s offer and the payment terms.
- Creating an Administrator’s report, providing the justification for why the creditors should accept the proposal.
The creditors rely heavily on the Trustee’s expertise, investigation, and professional integrity for accurate and fair information.
Potential Outcomes: Consumer Proposal vs Bankruptcy
It’s essential to understand the potential outcomes if a consumer proposal is rejected. The debtor may consider filing for bankruptcy. In such a scenario, creditors usually end up with less than what was offered in the consumer proposal.
