After your consumer proposal has been filed, the creditors have 45 days to respond to the Licensed Insolvency Trustee. They can either:
- vote for,
- against or
- abstain from voting.
On the 46th day, the trustee will review the votes and determine, based on the votes received, if the consumer proposal has been accepted.
- If the majority of the voting creditors have voted for the proposal, the consumer proposal is accepted.
But what happens if creditors vote against?
The first thing the trustee will do is to add up the against votes.
- If there are less than 25% of the votes against the consumer proposal, the consumer proposal still passes.
- If there are 25% or more voting against, and the creditors have requested it, there is a meeting of creditors.
The meeting is held even if the majority of creditors have voted for the consumer proposal.
- If the majority of creditors have voted against the consumer proposal, the trustee looks to see if the creditors have made counter offers.
For instance, the debtor may have offered to pay $200 per month for 36 months, and the creditors want $200 per month for 48 months. The trustee will let the debtor know about the counter offer and they can decide if they want to accept it. The trustee can help you review the pros and cons of either accepting, rejecting or making a counter offer.
How often do creditors vote against?
I reviewed 1,036 consumer proposal filed recently in our Windsor office. Of those 105 had sufficient against vote to require a meeting of creditors. Of those only 3 ended up not passing. It is also interesting to note that of the 105 meetings, 49 of these were requested by the same big bank creditor.
What is the trustee’s role during the voting period?
During the voting period our role is communicate with both you and the creditor. To illustrate, I will use the example of Tom and June (not their real names). They struggled when her income went down after 2 maternity leaves and in a few months she will be off on maternity leave again. They had $62,000 in debt, most of it with the same bank. They filed a consumer proposal offering $18,000. Big bank rejected it but advised they would accept $40,000. We advised Tom and June of this, but they could not afford the counter offer. They fine-tuned their budget some more and counter offered $30,000, and asked that we remind the bank that she will be off work for maternity leave. We gave this information to the bank, and they accepted the proposal with payments totalling $30,000.
The 45 day waiting period can be stressful as you are waiting to hear if the consumer proposal was accepted. However, your trustee will communicate with you during the process and they are the intermediary between you and the creditors.
This article was written by Rebecca Martyn, Licensed Insolvency Trustee with Hoyes, Michalos & Associates Inc.
I am currently in a 5 year bankruptcy proposal and am trying to pay off the proposal early. The trustee has told me I still need to pay all of the remaining administration fees, is this correct?
Yes, if your proposal calls for payments of $20,000, you must pay $20,000 for the proposal to end. There are no early payment discounts in a proposal. In fact, the Office of the Superintendent of Bankruptcy has issued a position paper on that exact topic.
What happens if the majority of creditors abstain?
Hi Dave. If all creditors abstain, the consumer proposal is automatically accepted, because there are no votes against.
If 25% of the creditors that vote request a creditor’s meeting, a meeting is held, and at that time the votes are counted. The trustee only counts the votes submitted, so if most of the creditors abstain from voting, the trustee would only count the votes submitted to determine whether or not the proposal is accepted or rejected.
Can you tell me why my consumer proposal is listed as a Bankruptcy?
Mistakes do happen – I assume you are referring to your credit report. I suggest you contact your trustee to discuss your concerns.
Hi. If a consumer proposal gets voted down does it automatically go to bankrupcy or do I have a choice. Thanks
If a consumer proposal is voted down (rejected) you are NOT automatically bankrupt.
I have to say, that very few consumer proposals are refused outright. Many creditors will vote “no”, but then offer alternate terms (a counter offer). In these cases we suggest the person that filed consider a counter-counter offer. In effect it becomes a negotiation. In the vast majority of cases there is a “deal” to be had.
Having said that, if your proposal is rejected then bankruptcy may be the most reasonable response. You filed a consumer proposal to deal with a financial problem. If the proposal won’t work then bankruptcy may be the right answer.
What happens if both( debtors and creditors) can’t agreed to a payment and there’s nothing to take away from the person because the debtor doesn’t own nothing by himself but with his wife? Is there any chance that he had to file for bankruptcy and she can get affected as well like without no car? Does she have to let go as well the car just because they are both cosigners? Thanks.
If the person that files a consumer proposal and their creditors don’t reach an agreement on the terms (the amount to be repaid) then the proposal is said to be rejected. In most cases, that means the person will at least consider filing for bankruptcy.
In the example you’ve given, a car loan (or lease), the bankrupt or the co-signer may keep the car as long as they continue to make the payments. It doesn’t matter that they filed for bankruptcy as long as the payments towards the car are made.
Does that help?
For a consumers proposal If 52.12% vote FOR and 47.67% vote Against. Then a creditors meeting is held. Do they vote again at the creditors meeting?
In simple terms, the voting “carries over” to the creditor’s meeting, so in the example you give, a creditor’s meeting is required to be called, but at that meeting, if no new votes are received, the proposal will be accepted.
Do I need a lawyer and an accountant to file a consumer report?
Only a licensed insolvency trustee can file a consumer proposal. A lawyer or accountant is not required. You are of course free to get advice from a lawyer or accountant prior to filing if you wish.
I filed a consumer proposal and paid the amount owing in November 2016. On my credit report, it shows these accounts as closed – paid by consumer proposal. Now I am getting phone calls from one of those creditors saying I owe them money, and yet this account shows as closed on my equifax credit report. I have put them in contact with BDO who I did the proposal with, but they continue to call. Do they have any legal recourse? Do you have any advice on where to go from here?
You have a couple of different approaches you may take. First, continue doing what you are doing – answer the phone, advise the debt was included with and discharged by your consumer proposal and offer to provide them with the related paperwork. Your Certificate of Full Performance of your consumer proposal is your proof that the debt has been settled and discharged in full. Second, you may put the creditor on notice that you believe the debt has been paid and that they should cease and desist all collection actions. If they believe they are owed any money they should proceed to Court. If they take you to Court make certain that you respond and appear to show the court the proof the debt was included in the proposal you completed in Nov 2016. Third, you may lodge complaints with either the appropriate government agencies regarding the creditor’s conduct. Depending on where you live this may be a provincial agency, or perhaps the Office of the Superintendent of Bankruptcy. I’d discuss option three with the BDO office that administered your proposal.
What you are experiencing is quite uncommon – in the few cases I have heard of, it is because the creditor has sold the debt to a third party (in error) and the third party just wants to get paid…
I have rejected from my consumer proposal and I have family and I have my truck to work and a family vehicle to drive my kids to school so if I file bankaruptcy would l I lose my vehicles even I make my payments every time
If you live in Ontario there is an exemption for 1 motor vehicle valued at up to $6,600. That means if you file for bankruptcy and the family car is worth less than $6,600 it is protected (you can keep it) – assuming there are no outstanding loans on it. If the truck is actually used to perform work (as opposed to being used to get you to and from work) then it may also be eligible for an exemption under the “tools of the trade” category.
I suggest you either speak to the trustee that helped you file the proposal that was rejected (since they know your case) or find a new trustee to discuss bankruptcy with.
I apologize if my answer was too technical – speaking to someone in person may be better for you.
I have 2nd and 3rd mortgages on my property, the equity of my house wouldn’t cover all 3 mortgages on the property if I was to sell the house at this time as the market value has gone down. I’m having a hard time making payments on the 2nd and 3rd mortgages and my other credit card loans, what should I do? I want to keep the house and resolve my debts too.
Unfortunately, if you are unable to make the required mortgage payments the lenders will have the right to seize and sell your home. The good news is if the third mortgage seizes and sells they have to guarantee the 1st and the second. Depending on the value of your home and how big the shortfall might be on the third mortgage if the house is sold, they may not be willing to assume the risk.
The best solution is to try and negotiate a new first that incorporates the 2nd and 3rd, but given that you owe more than the house is worth, that won’t be possible at this time. As much as I know you don’t want to lose your house, the best answer from a financial perspective may very well be to do so. Sorry.
For consumer proposal.
Offering $203 for 60 months or $305 for 48 months !
What is the best offer that may get accepted ?
The chances of acceptance are dependent on many factors, including who you owe money to (each creditor has different rules), how much you owe, what assets you have, and other factors. In general, a greater total dollar value offer, regardless of length of term, has a higher chance of success, but this is a question you should ask your trustee, since they have all of your details.
I have a lousy trustee who is only there to file paperwork. I’m having to seek answers from different venues. Can you answer the following for me please?
1. Why would creditors reject a consumer proposal offer if it would be more than what they would receive from a bankruptcy?
2. Why would creditors reject a counter offer if the total amount would be more than what they would receive from a bankruptcy?
3. How can I prepare if this goes to creditor’s meeting? What can I expect? What are they they expecting (typically)? Please don’t say talk to my trustee…
I need some negotiating tips pls 🙂
1. There are many reasons why a creditor might reject a consumer proposal, even if it provides a greater benefit (more money) to them than a bankruptcy. As a general rule, the largest Canadian lenders have told the trustee community they expect to see at least 1/3 of the debt repaid in a consumer proposal. It is not a “rule”, but a guideline we follow. That doesn’t mean proposals won’t be accepted for less – it is just a starting point for the average situation. So, if your initial offer was significantly lower than 1/3 creditors might reject it out of hand simply because it didn’t pass that threshold. Similarly, if a creditor believes a person has the ability to repay more of the debt that they are offering in their proposal, they might reject an offer. You also need to consider how quickly the debt was accumulated, is any of it “new’, there are many types of transactions that might cause a creditor to vote no.
2. The answer for 2 is the same as for 1. Being more money than a bankruptcy in and of itself is not always enough of an incentive for a creditor to agree to a proposal.
3. It is highly unlikely any creditors will actually attend your creditors’ meeting, unless you have significant CRA debt, in which case they may attend by phone. At least as far as consumer proposals are concerned, most voting is done by phone, fax and e-mail before the meeting starts.
Here’s a question for you though – if your creditors are pushing for a lot more money from you than filing bankruptcy would cost, shouldn’t you reconsider filing for bankruptcy? At the end of the day, a very large component of filing either a consumer proposal or bankruptcy relates to the cost. There should be a point at which the proposal payments that are being requested by your creditors cause you to re-evaluate whether it is still the correct solution to your financial problems. The analogy I like to use is that of bidding on an item at an auction. You made an offer and the creditors have rejected it. You can try a higher bid, but only if it makes sense. Don’t get caught up in the bidding to the point that you forget the reasons you bid in the first place…
the big bank rejected my proposal with no counter offers does this mean i am no longer able to counter offer? what if i make an offer and they still reject it? if i dont want to choose bankrupcy, how will my debts be like? do they come back with more interests and penalties because payments were not done during filing? if i dont want bankrupcy coz i want to maintain my house and car and work more to cover payments, will creditors consider payment arrangements, and how will my credit report appear if i withdraw my proposal? coz when I filed it, they marked me lowest on my credit file.
You may certainly continue to make counter offers to your creditors up to the point you have the First Meeting of Creditors for your proposal. That is when the actual voting takes place if your creditors vote no to your initial offer.
I think you may not fully understand how bankruptcy works. You can keep your house, you can keep your car as long as you continue to make the required mortgage and loan payments. If you have equity in your house then you’ll be required to pay an amount equal to your equity into your bankruptcy, but you will be given time to do so. There are penalties for making more money that the government standards, but if you compare that to the amount of debt you are eliminating it usually is a very good deal for you.
I think perhaps you should go and meet with your trustee (or call another trustee if you prefer) to review how bankruptcy works and what it may cost you. It should be equal to or less than the amount you agreed to pay in your proposal so it might actually make more sense financially to file bankruptcy than to keep increasing your offer in the proposal. It is at least worth looking at.
Hi, my dad filed a proposal over 7 years ago.
He paid his trustee and apparently had everything cleared. Now it’s over the 7 years and he tried to apply for a credit card and they denied him. The bank said that apparently the trustee had never released anything or done his job properly.
What are the legal routes to this? Because my dad called his trustee and now it seems as if he wants to charge him to re do this proposal which is ridiculous.
Trustees are subject to very specific rules and regulations that are monitored by the Office of the Superintendent of Bankruptcy (OSB). If you believe a trustee has acted inappropriately then you should contact the OSB and lodge a complaint.
I filed an approved CP a few months ago. One creditor (our builder) abstained from the vote. I recently received an invoice listed in my wifes name (we are both listed on the morgage). Is he able to sue for the amount even though we have him listed in the proposal and he will receive payment from the trustee? We don’t have a signed contract with him and no lein has been issued on the property. The home was built 2018 to about 95%. He did not complete final work. He has not contacted us in over a year.
This is a discussion you should have with your proposal administrator (trustee) as there are many legal issues involved, including whether or not the proposal was filed jointly by you and your wife, and whether or not the builder can lien the project for unpaid fees, making them a secured creditor. Your trustee can review this with you and provide further advice.
I filed a consumer proposal and I include a loan that is a joint under my name and also my wife’s name, the proposal is already under the process is there a chance to remove that loan on the list of my consumer proposal application and revised all the numbers again while under the process? Because my wife did not file for consumer proposal. Thank you.
Hi James. Your consumer proposal includes all of your debts, so you cannot remove a debt after it’s filed. However, since it is also your wife’s debt, she can continue making payments on it, and once she pays it off you can notify your trustee that it is paid and they can revise their records. Your consumer proposal administrator can explain this in more detail.
I recently applied for consumer proposal and my trustee seems like rushed me to sign the papers for filing. He didn’t even asked me if I used my credit card prior to the application, which I did. Later on, I got screwed because the creditors voted no on my proposal. Then they are telling that I used their money first prior to the application. I believed that, as a first timer my trustee should asked me those questions. He didn’t even bothered to look into my bank statements. As an expert into this field, what would be the best option to take. I already called the company to withdraw my proposal and opted out for bankruptcy application as well. I also heard that the bank have already submitted my debts to collection agency. I’m totally devastated because with that misinformation from my trustee, I got screwed big time. Not only that, my credit score is at the very lowest now.
If you have already filed for bankruptcy, your debts have been dealt with, so there may be nothing more you need to do. All trustees are regulated by the Office of the Superintendent of Bankruptcy, so you could contact the Office of the Superintendent of Bankruptcy if you wish to discuss your specific situation.
I think I was misinformed when I filed my CP. I was referred by a third party and they seemed involved until I started asking questions. The Trustee office called me after a week and a half to say that the creditors are asking for 250.00 instead of 230 that I proposed. When I agreed the trustee called again and said they wanted 265. I had originally given a void check to the consultant for a certain amount. Then without my know ledge the amount was split in two one went to the Trustee and the other to the consultant that introduced me to the Trustee. I had many questions for the Trustee and she denied that she is a part of the Consultant service. I began reading up on CP and contacted the OSB for advice. They told me that there should have been a meeting and copies of the negotiations, I looked through my documents and found none of the sort. Deep in my mind and after reading up information I believe that the creditors did accept my proposal. I am thinking of changeing the Trustee as the relationship has broken down. Is this possible
Hi Sandra. Unfortunately this is a common scam. A “debt consultant” charges you money, and then refers you to a trustee. (You don’t need a consultant; all licensed insolvency trustees offer no charge initial consultations, so you should never pay an up front fee, and there should be no money paid to anyone other than the trustee).
To find out whether or not you have actually filed a consumer proposal, I suggest you ask your trustee (not the debt consultant) to send you a copy of your proposal documents, and your Certificate of Filing a Consumer Proposal which will have your estate number on it. That will confirm whether or not you have file a proposal.
If there are any questions or concerns, you should contact the Office of The Superintendent of Bankruptcy again, and ask them to do a formal investigation so you can determine what has happened. It is critical that you find out what you have agreed to, and whether or not you have been scammed.
What happens if some creditors dont vote at all? Like when a creditor gets served with the proposal papers and decide just not to reply at all does that automatically make there vote a yes?
Hi Connie. A consumer proposal is automatically approved unless 25% or more of the voting creditors request a creditor’s meeting (at which point the official vote is held, and if more than half of the dollar value vote in favor the proposal is accepted). So, if no creditors respond, your consumer proposal is automatically accepted. Your trustee can explain the process in more detail.
I live in Alberta and I filed a consumer proposal offering 13,500 for 60 months they came back saying they want 21,000 for 60 months. I am
Told I can make a 1 time counter offer more than what I I it’s offered. If I offer them 17,000 what are the chances that will be accepted?
One of the other alternatives is bankruptcy but I don’t own a car, house or any investments. What type of clothing and household assets can I keep?
You may want to have a chat with your trustee – there are no restrictions on the number of “counter offers” you and/or a creditor can make. If your trustee has said you can only make one counter then that is simply their policy. When counter offers are made your trustee is required to schedule a First Meeting of Creditors which where the actual voting takes place. That’s when the “final version” of your proposal is either accepted or rejected.
I can’t tell you whether your counter offer of $17,000 will be accepted without knowing much more about your situation. I suggest you call your trustee and discuss your options, including bankruptcy and how it works.
I submitted a consumer proposal and the major bank that I owe money to wants a meeting. This was request on the 9th of March and there was no details on the account as to why. What could they possibly want from a meeting request? I don’t believe they counter-offered anything. They simply requested a meeting
I am sorry – your trustee should have explained whenever 25% or more of your creditors/debts vote “no” to a consumer proposal a meeting is required by law. The purpose of the meeting is to actual tabulate the votes to see if a proposal passes or fails. Creditors are not required to tell you (or your trustee) why they vote no, although it is unusual that they did not send through alternate terms (a counter offer). I am sorry they weren’t more communicative…
My wife and I have a joint line of credit for $50,000 and it has gone to collection. We are considering filing credit proposals and our trustee has said that if we don’t both file for the credit proposal at the same time that the collection agency can go after both of us for $50,000 each. She didn’t really have an explanation as to why.
Hi Tom. Joint debt means that you are both liable. It’s not 50/50, it’s 100%/100% for each of you. So, if one of you files a consumer proposal, the lender still has the option to pursue the other borrower for the full amount, which is why the common strategy is to either file a joint proposal, or both file proposals at the same time, to prevent unnecessary phone calls and collection activity.
Hi, I wanted to know if a creditor doesn’t prove the debt on my Consumer Proposal am I still liable to pay it in my CP payments?
Yes – when you file a proposal you offer a set amount of money against a disclosed amount of debt. If a creditor doesn’t submit any paperwork it means the other creditors that do submit paperwork will receive more of the money. If it is a large claim and/or your proposal is to repay 100% of your debts then it may make sense to file an “amendment” to your proposal and adjust the total amount you are paying. The best thing to do is to contact the licensed insolvency trustee handling your proposal and discuss this with them directly.
If one creditor with more than 25% vote says no to a consumer proposal offered, can we negotiate with him to pay him more? and else everyone the same amount offered?
No you cannot, but one creditor with 25% of your debt should not be able not be able to change the terms of your proposal, unless some of your creditors do not vote. As long as 50% +$1 vote for the proposal it will still pass, even with a creditor that has 25% of the debt voting no. You should contact your trustee to discuss how the voting works once the 45 day voting period expires.
If the debtor offers a Consumer Proposal (CP) through a Licensed Insolvency Trustee (LIT) but the CP is rejected by the vote of the creditors, then what subsequent state would exist regarding legal ownership of the debtor’s assets? My understanding is that the moment the debtor declares bankruptcy, the legal ownership of all of the debtor’s assets become immediately transferred to the LIT. For a CP, does the debtor retain legal ownership of all assets even if the CP is rejected or does the LIT subsequently (after rejection) receive transfer of legal ownership of the debtor’s assets even if bankruptcy is not subsequently declared?
Yes, a debtor’s assets do not vest in an LIT when they file a consumer proposal. Ownership is unaffected by a proposal.
Hi Doug/Ted, Do you still find that Royal Bank rejects all consumer proposals? What about Scotia Bank? I am in a bit of a pickle where Scotia is my overwhelming main creditor (80,000) I only owe around 2500 on two other cards. I do have nearly 90 thousand available credit with three other banks (untouched), do you recommend I spread the amount around using transfers so Scotia is not the overwhelming creditor or would be a type of fraud? Also, do you guys practice in Alberta as well or just Ontario. Thanks for the reply and taking your time to read.
The Royal Bank doesn’t outright reject most proposals, BUT they do tend to “counter” offer whenever they have the controlling votes. Scotia is less likely to do so, but it all depends on the activity in the account. For example, someone that has maxed out a line of credit and has been paying the interest on it for a year or so is more likely to get a lower repayment amount than someone that ran up and maxed out the debt last month. I wouldn’t suggest moving the debt around unless it is to obtain better interest rates. Anything you do financially in the three months prior to filing is subject to review.
At this time we are only practicing in Ontario… Good luck sorting things out. T
When my CP was filed, RBC didn’t respond or prove their debt and according to my credit report, they have now sent the balance to a collection agency. I was told by my trustee that RBC cannot come after me for this debt. Is this correct?
Yes, but you should contact your trustee to let them know about the collection agency so they can send them a notice about your CP as well…
I have just filed a consumer proposal 2 weeks ago, and a creditor is ignoring the proposal after confirming they have received it. They are still asking for payments and constantly harassing me. Is there anything that can be done? Can i report them?
Certainly – first report them to your trustee and then report them to the Office of the Superintendent of Bankruptcy. A consumer proposal is a legal process that provides specific protections for you when you file.
Hi, I filed for CP and i got a letter from Amex saying the received the CP notification, and at the end of the note it states “We will not waive our rights by law or under the cardagreement”. what does this mean?
Hi Sayuri. Federal law states that credit cards are included in a consumer proposal (once it’s approved by the creditors), so I have no idea what the Amex letter is saying. I suggest you talk to your consumer proposal administrator and they can contact Amex on your behalf if required.