Can A Consumer Proposal Be Rejected?

“Can a consumer proposal be rejected?” Yes, a consumer proposal can be rejected by your creditors. So it’s important that you understand how a consumer proposal is approved or rejected by your creditors.

How a Consumer Proposal Can Be Rejected or Approved

Creditors have 45 days to review your proposal

• Your proposal will be sent to your creditors for their review. A document called a voting letter, which allows a creditor to indicate its vote, is also sent. Creditors are required to file with your Trustee a proof of claim and completed voting letter before their claim can be registered for voting on the proposal.
• Your creditors will have 45-days to review your proposal and at the end of that 45-day review period, your Trustee will compile and review the voting letters received. There are 3 possible scenarios: deemed approval, approval at a meeting of creditors, non-approval by your creditors or the court.

Deemed approval by creditors

• If no voting letters were received, your creditors are “deemed” to have accepted your proposal.
• If those creditors voting “no” comprise less than 25% of the value of claims filed, the creditors are deemed to have accepted the consumer proposal.

Approval at meeting of creditors

• If those creditors voting “no” comprise more than 25 percent of the value of claims filed, your Trustee shall be required to hold a meeting of creditors. Creditors will usually vote “no” because they want more money. Therefore, a meeting of creditors would be held to discuss what the debtor would have to offer in a consumer proposal before it would be accepted by the dissenting creditor(s).
• If you agree to accept the creditors’ counter, an amended consumer proposal will be tabled at the meeting of creditors and it will be accepted at that meeting.

Proposal not approved

On the other hand, if both you and the creditors cannot come to an agreement of terms, the proposal will be rejected at the meeting of creditors. If that happens, you can always file another consumer proposal that provides more favourable terms to the creditors. Or alternatively, you can file for personal bankruptcy.

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