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Can a consumer proposal be rejected?

Rejected Stamp of Disapproval

You finished drafting up your consumer proposal with a Licensed Insolvency Trustee (LIT) and it’s now being presented to your creditors.

Although it’s rare, there is the chance that your creditors may vote to reject your consumer proposal.

What happens then?

Read on to learn more about the consumer proposal voting process and what to do in the event that your proposal is not accepted.  

What Percentage of Consumer Proposals are Accepted?

Let’s start with the good news: the vast majority of consumer proposals are accepted by creditors. This is because a LIT works with you to create a proposal that’s considered reasonable by your creditors. The creditors have 45 days from the date of signing to vote on the proposal.

How Do Creditors Reject or Approve your Proposal?

Each creditor is provided with a “vote” for each dollar of their claim. They can respond by accepting your terms as filed, rejecting your terms, or proposing alternate terms.

The proposal passes if 51% of the creditors voting vote in favour of the terms.

What Happens if my Proposal is Rejected?

If creditors with more than 25% of the total votes reject the proposal and request a creditors’ meeting,  a creditors’ meeting is called to discuss the proposal.

All is Not Lost

Even if the majority of creditors vote “no”, this does not mean the process is over. You still have other options available:

  • You can try to renegotiate the terms of your proposal
  • If your consumer proposal represented the most you could pay, and other options aren’t viable, you can file for bankruptcy

Next steps

To file a consumer proposal, you will need a Licensed Insolvency Trustee (LIT). Before choosing a LIT, we highly suggest you do your research.

Your trustee will work with you to develop a proposal that is suitable for all parties involved and once it has been filed, they are responsible for corresponding with your creditors.  

If you’re considering a consumer proposal to help you pay off your debt faster, contact us. We’ll help you navigate the entire process, from helping you create a proposal that works for you and your creditors, to ensuring that your rights are upheld.

To book a free consultation with our experienced team of LITs, click here.

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