Will My Consumer Proposal Be Approved if RBC is a Creditor?

The Royal Bank of Canada has developed a reputation in the consumer insolvency industry of being a notoriously demanding creditor to deal with in consumer proposal proceedings.

RBC Is Difficult to Deal With

While many creditors will accept a return of 25 to 35 cents on the dollar of their claims, more often than not, RBC demands much more than this as a condition of accepting a consumer proposal. We have seen RBC request amendments to consumer proposals requesting 70 cents on the dollar of their claims, which many debtors simply cannot afford to pay.

How Your Consumer Proposal Gets Approved If RBC Is A Creditor

So under what conditions will your consumer proposal be approved if RBC is one of your creditors?

First, it’s important that you understand how a consumer proposal is approved by creditors:

• The proposal is 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 the Trustee a proof of claim and completed voting letter before their claim can be registered for voting on the proposal.
• At the end of the 45-day period after the proposal was filed with the OSB, the Trustee will compile and review the voting letters received. There are 3 possible scenarios:
  1. If no voting letters were received, the creditors are “deemed” to have accepted the proposal.
  2. 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. Therefore, if RBC’s claim comprises less than 25% of the value of your total debts, your proposal will be deemed to have been approved by your creditors even if RBC votes “no” on your proposal. This is assuming that all your other creditors either voted “yes” or didn’t bother voting at all.
  3. If those creditors voting “no” comprise more than 25 percent of the value of claims filed, the Trustee is required to hold a Meeting of Creditors. Therefore, if RBC’s claim comprises 25% or more of the value of claims filed, your Trustee will be required to hold a Meeting of Creditors.

At the Meeting of Creditors, your creditors will formalize their vote either “for” or “against” your proposal. And at that meeting, each dollar owed by a creditor is equal to one vote by law. Therefore, if RBC is owed less than 49% of the total debts in your proposal, your proposal will be approved assuming all your other creditors vote “for” your proposal even when RBC votes against it. On the other hand, if this isn’t the case, then your proposal won’t be approved unless you agree to RBC terms.

If you do agree to RBC’s terms, then your Trustee can adjourn the Meeting of Creditors, amend your consumer proposal, send the amended consumer proposal to RBC for their review and then reconvene the Meeting of Creditors to formalize the approval of your amended consumer proposal.

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