What is the Voting Period in a Consumer Proposal?

Consumer Proposal Voting Period Explored

A consumer proposal is an increasingly favored solution for consumers grappling with their debts. Governed by the Canadian Bankruptcy & Insolvency Act, it’s a formal legal process overseen by a licensed bankruptcy trustee, also known as the Consumer Proposal Administrator.

Consumer Proposal Voting

At its core, the idea behind a consumer proposal is that you offer to repay a fraction of your unsecured debts (like credit cards, overdrafts, income taxes, etc.). If your creditors accept this offer, you’re absolved from repaying the entire debt amount. This acceptance process is often referred to as “voting.”

The Voting Process Explained

When it comes to the voting process in a consumer proposal, there are several critical points to understand:

 

  • Creditors have a 45-day window to respond to the trustee, indicating their stance on the proposal.
  • If a creditor fails to respond within 45 days, their chance to vote is forfeited.
  • Every creditor gets a vote for each dollar they are owed.
  • If the majority of votes are affirmative, the proposal is legally binding on all creditors.

If a major creditor rejects the proposal, they often propose a counteroffer. If the proposal isn’t accepted within the initial 45 days (due to a major creditor’s rejection), an additional three weeks are allotted for negotiation.

The encouraging news is that most consumer proposals are accepted, either as initially filed or after some negotiation. One might wonder why creditors would willingly accept less than the full debt amount. The reason is simple: they often realize that they’ll recover more money this way than if you were to file for personal bankruptcy.

Determining a fair offer in a consumer proposal involves considering numerous factors. It’s advisable to consult a bankruptcy trustee about your unique situation. Most proposals necessitate monthly payments over a maximum period of five years, but the timeframe can be shorter. It can also involve a one-off lump-sum payment, sourced from either the voluntary sale of your assets or a contribution from a friend or relative. You’re also permitted to pay off your proposal earlier than stipulated.

It’s important to remember that a consumer proposal isn’t a quick fix to evade debt repayment. It’s intended for individuals who can’t repay their debts and would prefer to avoid filing for personal bankruptcy.

If you’re contemplating filing a consumer proposal, it’s best to consult a bankruptcy trustee. No one else can file a proposal on your behalf, only a licensed trustee can. Schedule a free confidential consultation to evaluate if a proposal could help you clear your debt sooner while avoiding bankruptcy.

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