A consumer proposal can be an effective way to resolve debt problems but it’s important to understand how the process works.
There are many elements to making a consumer proposal, so you’ll want to find out exactly what’s involved before you decide to take any action.
When you’re considering whether or not a consumer proposal is right for you, there are many questions you’ll want to get answers to.
For example, what happens at the meeting of creditors during my proposal?
What happens if my proposal is rejected?
Am I eligible to make a consumer proposal?
Fortunately, it’s easy to get the answers you need.
Need Help Reviewing Your Financial Situation?
Contact a Licensed Trustee for a Free Debt Relief Evaluation
By speaking to a licensed insolvency trustee (LIT), you can learn more about what a consumer proposal is and how the process works, as well as what it would mean for your unique financial situation.
In addition to this, a trustee can help you to explore other debt solutions and find out which one is right for you.
Do You Have to Meet with Creditors When You Make a Consumer Proposal?
When you make a consumer proposal, your licensed insolvency trustee will communicate with your creditors on your behalf.
However, a creditors’ meeting may be held during the course of the proposal and, if it is, you will need to attend.
Although it’s not particularly common for a creditors’ meeting to be held for the purposes of a consumer proposal, one will be arranged if:
- The Official Receiver (acting on behalf of the Office of the Superintendent of Bankruptcy) requests it, or,
- Creditors who are owed more than 25% of your total debt request it.
It’s extremely rare for an Official Receiver to request a meeting for a consumer proposal, so, if a meeting is held, it is likely to be because creditors have requested it.
Why Would Creditors Request a Meeting?
If your creditors don’t agree with your proposal or would like some of the terms of your proposal to be modified, they may request a meeting.
Before your proposal is approved, creditors are required to vote on whether or not they accept it.
If they want to oppose your proposal, they can only do this by calling a creditors’ meeting.
However, not any creditor can insist that a meeting is called.
The request must be made by a creditor or creditors that are owed at least 25% of your overall debt in order for it to trigger a meeting.
What Does a Creditors’ Meeting Entail?
When you make a consumer proposal, your creditors are permitted to vote on your proposal.
If no meeting is requested at this point, your proposal is deemed to be accepted.
However, if creditors who are owed more than 25% of your total debt request a meeting, one will be held.
Crucially, a creditors’ meeting does not mean that your proposal won’t be accepted.
It simply means that creditors will have the opportunity to discuss the proposal with you and the trustee in more detail and may make requests that some elements of your proposal are changed.
In some cases, a proposal will be accepted without any changes being made, even when a creditors’ meeting is held.
Although a creditors’ meeting can take place face-to-face, it rarely does.
In fact, requesting a creditors’ meeting may simply be a formal way of asking for the votes to be counted.
If no creditors request a meeting, your proposal is deemed to be accepted, which means the creditors’ initial votes aren’t technically counted.
Once a meeting is requested by creditors who are owed more than 25% of your total debt, the votes must be counted, and a meeting scheduled.
In reality, the meeting may not actually take place, even though it has to be scheduled due to the request.
Can a Creditors’ Meeting Be Avoided?
If the criteria are met for a creditors’ meeting to be held, you can’t evade it.
However, most creditors’ meetings don’t go ahead simply because they don’t need to.
When a creditors’ meeting is requested, it must be scheduled within 21 days of the end of the voting period.
During these 21 days, your trustee and your creditors can liaise via telephone and email to discuss the details of your proposal.
Your trustee will discuss this with you beforehand so that you are fully involved in the process.
For example, in your initial proposal, you may have offered to a creditor 20% of what they’re owed.
The creditor may request a meeting and ask that you repay 40% of what you owe them.
During the 21-day waiting period, negotiations may mean that you and your creditor are willing to come to an agreement that you will pay back 30% of what is owed.
As an agreement has been reached, there is no need for the creditors’ meeting to go ahead.
Instead, creditors can simply cast their votes again and your consumer proposal can be accepted without a meeting taking place.
Should You Make a Consumer Proposal?
If you’re unable to manage your debts, a consumer proposal might be an appropriate course of action.
However, it’s important to seek personalized advice before you decide whether or not this is the right type of debt solution for you.
Although there are many benefits associated with consumer proposals, they do have a medium to long-term impact on your credit file.
Due to this, it’s important to understand the effects of a consumer proposal and how you can rebuild your credit rating once the proposal has been fulfilled.
To learn more about consumer proposals and debt solutions, why not talk to a licensed insolvency trustee?
With in-depth knowledge of the process, a trustee can help you to learn more about making a consumer proposal and assist you in finding the right way to resolve your financial issues.
At Bankruptcy Canada, we’re always on hand to provide the guidance and information you need.
To speak to a trustee today, simply contact us on (877) 879-4770.
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