What happens if consumer proposal is rejected

The majority of consumer proposals are accepted as your trusted advisors are experienced in designing a consumer proposal that meets the criteria that many creditors review when looking at your offer. When this happens there are a few things to remember. At that point a meeting of creditors is held and the new terms are discussed.

If you agree to meet the creditors terms, then the consumer proposal is deemed to be accepted and you would continue making the payments. Based on the results of the votes, they will determine if the creditors have accepted the consumer proposal. If the consumer proposal is approved, it is binding on all unsecured creditors. If the majority of unsecured creditors, in dollars, vote against the consumer proposal, the trustee will review for counter-offers from the creditors.

And if there are counter-offers, the trustee will review these offers with the debtor, including the pros and cons of accepting, rejecting, or making another counter-offer. The meeting of creditors can be adjourned to amend the consumer proposal and correspond with the creditors. Yes, creditors can reject the consumer proposal, though it is rare.

But when they do reject it, they often do so with a counter-offer. If they make a counter-offer, you can either accept or reject it or make another counter-offer.

But the Debtor must show that they are offering the most that they can afford to pay through the consumer proposal. In most cases, creditors will request a change to the original terms that you offered because they know that if you declare bankruptcy, they will most likely get less than you offered in the proposal.

This could mean asking for a few more dollars per month or they may ask for a change regarding the length of your payment plan — keep in mind that 60 months five years is the maximum amount of time that a proposal can last.

However, if the terms are not acceptable to you, a counter-offer can be made to your creditors. The best advice we can give is to make a proposal to your creditors that is reasonable in terms of what you can afford to repay and what they might expect to receive. You want to reduce the likelihood that your proposal will be rejected as it speeds up the process and is much less stressful for you. Sign up for our newsletter to get the latest articles, financial tips, giveaways and advice delivered right to your inbox.

Most creditors perform a calculation for each of the consumer proposals they receive: they calculate how much money they would get from the proposal, and compare it to how much they would get if the debtor were, instead, to file for personal bankruptcy in Canada. If the proposal offers greater realizations than a bankruptcy, they will be inclined to accept it. The greater the realizations, the more likely they are to approve on it.

In this example, since the proposal is a better deal for the creditors than a bankruptcy, they will probably accept it.