Creditor Voting on Consumer Proposals
A consumer proposal is a legally-binding agreement between an insolvent person who is unable to repay all of their unsecured debts and their unsecured creditors. It is governed by the Bankruptcy and Insolvency Act and enables insolvents to repay a portion of their eligible unsecured debts over a period of up to 5 years. Upon the successful completion of their proposal, the insolvent is released from the debts covered in their proposal.
In Ontario, proposals can only be filed and administered by federally-licensed trustees in bankruptcy, such as David Sklar & Associates.
How does Creditor Voting Work?
After your trustee has determined that you are insolvent and that you are able and willing to successfully complete a consumer proposal, you and your trustee will work together to create your proposal.
Your trustee will then file your proposal with the Office of the Superintendent of Bankruptcy (OSB) and submit it to your unsecured creditors for approval. Your creditors have 45 days to accept or reject your proposal.
During those 45 days, you will be protected from the unsecured creditors included in your proposal, who are required, by law, to:
- stop charging interest,
- stop all collection efforts,
- stop wage garnishees,
- stop collection calls, and
- stop all legal actions.
Also, during this time, you will not make any direct payments to those creditors in your proposal.
What Happens if there are no Objections from Creditors?
If after 45 days, none of your creditors have requested a meeting, your consumer proposal will be considered accepted. 15 days later, if no request for a review of your proposal has been received, the Court will deem your proposal accepted by the Court.
It should be noted that in the vast majority of cases, proposals submitted by David Sklar & Associates are accepted by creditors. This is due, in part, to the great care we take while working with our clients and our commitment to finding the best solution for everyone involved in a proposal.
As officers of the court, we are licensed by the federal government to protect your rights and to ensure a fair proposal.
What Happens if there is an Objection?
If during the 45 day period, one or more creditors (who hold more than 25% of your unsecured debt) call for a meeting, then a meeting will be held for all your proposal creditors to attend (or vote by prearranged proxy). The OSB can also call a creditor meeting.
In order for your proposal to be rejected, creditors representing more than 50% of the dollar value of the debt covered in your proposal, must specifically vote to reject the proposal during the meeting, otherwise it will be considered accepted.
If there are no calls for a review of the proposal, then 15 days after the proposal is accepted at a meeting, the Court will approve the proposal. Note: both the OSB and the Court have the right to reject your proposal.
When a proposal is accepted by the Court, it becomes a binding agreement on you and all of the creditors in the proposal, including any creditor who may have voted against it.
What Happens if the Consumer Proposal is Rejected?
If a proposal is rejected you may work with your trustee to modify your proposal and resubmit it – or file for bankruptcy if you have no other reasonable options – or find another way to pay your unsecured debts.
In our experience, proposals that are fair and offer the unsecured creditors more money than they would get if you filed bankruptcy – are generally accepted.
What Happens After the Court has Accepted a Consumer Proposal?
You will then:
- make all the agreed upon payments (usually monthly) to your trustee for disbursement to your proposal creditors,
- attend two credit counselling sessions, and
- honour all the terms of your proposal.
When you have successfully completed your proposal, you will be released from the debts covered by your proposal. You will have earned a fresh financial start and learned the skills to ensure a brighter financial future for you and your family.
Are You Eligible for a Consumer Proposal?
If you are in serious financial trouble, and are unable to repay your debts in a reasonable period of time – you might qualify for a consumer proposal.
If you live in the Toronto area, you are welcome to call us for a free, no-obligation consultation, where we will review your finances in detail and discuss all of your options for getting out of debt. If we can find a way for you to get out of debt without declaring insolvency, we will share the information with you. Call us at 416-498-9200 to book an appointment at one of our 6 Toronto Area offices.
If you live outside of the Toronto area – visit the Office of the Superintendent of Bankruptcy’s website for a complete list of licensed trustees in bankruptcy in your area.