So Glad My Creditors Accepted My Proposal

So Glad My Creditors Accepted My Proposal

Navigating The Consumer Proposal Path: How To Get Creditors Onboard?

Understanding the dynamics of debt management is pivotal, especially when considering options like a consumer proposal. This legal process can provide significant relief from unsecured debts like personal loans or credit cards, but it requires careful navigation. One of the critical aspects of a successful consumer proposal is ensuring that your creditors accept your proposal. Let’s delve into the dynamics of a consumer proposal and how to get your proposition accepted by your creditors.

Understanding The Concept Of A Consumer Proposal

A consumer proposal typically allows you to repay just a portion of the debt you owe. The final costs depend on your income, assets, and the nature of your debts. However, acceptance of your proposal depends on certain circumstances:

Considerations For Acceptance Of A Consumer Proposal

Offering At Least The Bankruptcy Amount

In Canada, bankruptcy is the last resort for debt management. It involves making payments towards the bankruptcy court, with the amount you owe your creditors primarily based on your monthly income and household size. For your consumer proposal to appeal to your creditors, it needs to offer at least as much as they would get if you declared bankruptcy.

High Enough Consumer Proposal Payments

The approval chances of your consumer proposal also depend on your creditors’ modus operandi. Most creditors are likely to accept around a third of your total debt amount, although there are no obligations for immediate acceptance, unlike in bankruptcy. Your proposal may face rejection if:

  • The amount you request to keep for essential expenses is deemed unfair.
  • Majority of your creditors vote in favor of a counteroffer, which might result in a higher payment amount.

Making An Appealing Offer: How Much Should You Propose?

The rejection or acceptance of your consumer proposal depends on several factors. Generally, you’ll need to offer:

  • More Than The Bankruptcy Amount: A good approach is to propose to pay your creditors a little more than they would receive if you filed for bankruptcy.
  • The Minimum Amount To Meet Your Creditor’s Internal Policy: Typically, consumer proposals are marketed as saving 70% of your debts, with most lenders accepting 30%, unless you have a high income or significant assets.

Remember, creditors have varied policies, and they accept different proposals based on these. It’s essential to demonstrate your willingness to negotiate to get out of debt.

Crafting Your Proposal: Why Target The Majority Creditors?

To qualify for a consumer proposal, you need the acceptance of creditors holding the majority (51%) of your debt. So, constructing an offer that appeals to these creditors can increase your chances of qualifying for the proposal. The proposal takes effect as soon as a simple majority of the creditors accept it.

Role Of A Licensed Insolvency Trustee (LIT)

A consumer proposal is a legal process conducted by a Licensed Insolvency Trustee (LIT). They facilitate the proposal through the bankruptcy court in your region. It’s the responsibility of your LIT to negotiate with your creditors, offer advice, and guide you towards the best decisions. Beware of “debt-relief” companies claiming to offer consumer proposals and charging unnecessary fees. By law, LITs must be certified by the Government of Canada and offer their services free of charge.

Timeline To Qualify For A Consumer Proposal

After reviewing your case, your LIT will draft your consumer proposal and submit it to your creditors. The proposal should include a report detailing your personal situation and reasons for financial distress. The creditors then have 45 days to accept or reject the proposal.

Acceptance Of A Consumer Proposal

The approval or denial of your consumer proposal depends on a few factors. Here’s when your creditors will likely accept your proposal:

  • If The Majority Of Your Creditors Accept: For your consumer proposal to proceed, at least 75% of your creditors must agree to it.
  • Upon Expiry Of The 45 Days: If the decision period ends and less than 25% of your creditors have requested a meeting, your consumer proposal will be deemed “accepted” and proceed automatically.
  • If There’s A Creditors Meeting: If more than 25% reject the initial offer, your LIT will arrange a meeting with your creditors. After most of them accept the new proposal, it may be deemed as filed or amended.

Ensure your proposal is reasonable to avoid rejection at the creditors’ meeting. If the court rejects your consumer proposal upon review, your creditors can resume or start debt collection proceedings against you.

Dynamics Of A Creditors Meeting

If a creditor representing around 25% of your debt votes against your proposal, your trustee will schedule a meeting where votes will be cast again. You need a 51% approval at the creditors’ meeting for your proposal to proceed. Even if some creditors vote against your proposal, their votes may be of little importance, depending on the weight they carry.

Consumer Proposal Or Personal Bankruptcy: Making The Choice

Creditors generally prefer consumer proposals to personal bankruptcy as they receive a larger refund of what they’re owed. However, they usually receive less from a consumer proposal compared to other debt solutions. It’s crucial to show that you’ve tried other debt solutions without success. If you can convincingly argue that personal bankruptcy is your only option if they don’t accept your proposal, creditors are more likely to accept it.

Concluding Thoughts

Before filing a consumer proposal, ensure you have explored all other options, such as a debt consolidation loan or a debt management program. Numerous financial experts are available to help you manage your debt. When your creditors accept your consumer proposal, it can be a significant relief and a step towards financial stability.

Frequently Asked Questions

Can a single creditor lead to the rejection of my consumer proposal?

Each of your creditors is given a vote for every dollar you owe them once your consumer proposal is submitted. A single creditor usually can’t lead to your proposal being rejected, as voting happens according to a majority rules process. The only exception would be if that single creditor holds the majority (over 50%) of your debt.

Do creditors prefer you to file for a consumer proposal or bankruptcy?

Most creditors would rather approve your consumer proposal than wait for you to declare bankruptcy as they’ll probably receive more of what they’re owed. However, a consumer proposal may not offer them as much money back as other debt solutions like debt consolidation and credit counselling would.

What happens If creditors don’t vote?

A creditor must vote in writing to reject your proposal. Unless a creditor votes against your proposal, the lack of vote will be interpreted as being in favour of your proposal.

Are my assets protected in a consumer proposal?

If your consumer proposal is accepted, all of your assets are protected from seizure. The more money you can offer your creditors, the more likely the proposal will be accepted, allowing you keep all of your assets.

Can I Approach My Creditors On My Own?

Although many people try to approach creditors on their own, this is not recommended. A consumer proposal is a binding legal agreement and if not filed properly, creditors are unlikely to accept your proposal. It’s best to contact a licensed bankruptcy trustee in your province or territory for this process.

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