Consumer Proposal Voting: What Happens When Creditors Vote No

Category: Consumer Proposal (22) comments

what happens if creditors vote no proposal

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.

Category: Consumer Proposal |

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  1. Alex

    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?

    1. J. Douglas Hoyes

      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.

    1. Ted Michalos

      Mistakes do happen – I assume you are referring to your credit report. I suggest you contact your trustee to discuss your concerns.

    1. Ted Michalos

      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.

  2. Gigi

    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.

    1. Ted Michalos

      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?

  3. Daphoney

    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?

    1. J. Douglas Hoyes

      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.

    1. J. Douglas Hoyes

      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.

  4. Angela


    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?

    Many Thanks!

    1. Ted Michalos

      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…

  5. Jose Paez

    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

    1. Ted Michalos

      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.

  6. Sarah

    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.

    1. Ted Michalos

      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.

    1. J. Douglas Hoyes

      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.


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