When you file a consumer proposal, your Licensed Insolvency Trustee will submit it to the Office of the Superintendent of Bankruptcy, the regulatory body for insolvency in Canada.

Depending on how much you can afford to repay, you may ask your creditors if you can pay less or reduce your monthly payment under the Bankruptcy and Insolvency Act.

At this stage, the terms of your consumer proposal are sent to your creditors, who vote to accept, reject or request changes to your offer.

Your Licensed Insolvency Trustee will also send creditors a Proof of Claim form for them to complete to recover money owed to them.

Understanding creditor voting in a consumer proposal

Creditors must vote on whether to accept your consumer proposal or not. Each creditor has one vote for each dollar they are owed, and if a majority of creditors vote to accept the proposal, it is accepted.

Creditors have different levels of what is acceptable, and some may attach some additional terms before they accept your proposal. However, your trustee knows this and will ensure your offer has the best possible chance of success.

Your creditors have 45 days to review your offer and vote on your proposal. You don’t need to make any payments during this time, and there are no interest or charges.

Through a Stay of Proceedings, you receive immediate protection from your creditors upon filing your consumer proposal. As a result, collection calls, wage garnishments and other legal action will stop. Creditors must obey these rules throughout the duration of your consumer proposal.

If your consumer proposal is accepted

If your consumer proposal is accepted, it’s approved by the court after fifteen days unless the Office of the Superintendent of Bankruptcy or another interested party requests a court review.

If the proposal is not reasonable or fair to you or your creditors, the court can reject your consumer proposal within the fifteen-day period.

From there, your consumer proposal becomes legally binding with all of your creditors. You stop making payments to your unsecured creditors and start paying your consumer proposal.

Can a consumer proposal be rejected?

While the majority of consumer proposals are accepted, some are also rejected.

If this happens, your trustee may propose alternative terms to offer your creditors. By increasing the monthly payment or making changes to the terms, you can return to your creditors with an improved offer.

What happens if a consumer proposal is rejected

When you cannot reach an agreement, you will no longer receive creditor protection under the Bankruptcy and Insolvency Act, allowing creditors to proceed with recovery action.

Nevertheless, your trustee will explore alternatives with you that might help you resolve your debts.

Meeting of creditors

Occasionally, a meeting of creditors can be called by the Office of the Superintendent of Bankruptcy or by creditors who make up at least 25% of the consumer proposal’s debts.

Most creditors will usually attend the meeting by proxy or voting letter.

At this meeting, creditors will vote to accept, reject or change your consumer proposal. The creditors may also appoint inspectors to represent them during this meeting.

Fortunately, your Licensed Insolvency Trustee will represent you and carry out all correspondence.

Source: The OSB: Consumer proposals

Will my consumer proposal be accepted?

Creditors accept most consumer proposals. If it’s rejected, it can usually be resolved by changing the terms.

Conclusion

Although creditors can accept, reject or request changes to your consumer proposal, they have a high acceptance rate.

If you want to learn more about filing a consumer proposal, let us connect you with a Licensed Insolvency Trustee today for a free and confidential consultation.

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