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What Happens if a Consumer Proposal is Rejected?

A consumer proposal is just what it sounds like. It is a proposal that you send to your creditors with the help of a trustee. You propose to pay off a portion of your unsecured debt within a certain timeframe (the maximum being five years) and in return your creditors agree to forgive the balance of your debts. Once you and your creditors both agree to the terms of the proposal, it is legally binding.

At this point, no further interest will be applied to your debts; and creditors and collections agencies are no longer allowed to call you for payments or to garnish your wages. Unlike with bankruptcy, filing for consumer proposal does not put your personal assets in jeopardy.

It is rare for creditors to outright reject a consumer proposal. In most cases they will either accept it, or they will request amendments to the terms. They do this because most creditors would rather see you file for a consumer proposal and receive some of their money than to see you file for bankruptcy and risk getting nothing.

What happens when you file for consumer proposal?

Once you file for consumer proposal, your creditors will have 45 days to vote on whether or not to accept it. The system is majority rules – so if they majority vote yes, and one votes no, the one who voted no will still have to accept the terms and participate in the proposal.

Creditors have four options once they receive your consumer proposal:

  • Vote yes and accept the terms.
  • Vote no and reject the terms.
  • Reject the terms and call a creditors meeting to request amendments such as increasing the payments or making changes to the length of the term.
  • Do nothing

What happens if creditors vote no on a consumer proposal?

If your creditors reject your consumer proposal, you still have options. These include the following:

  • Negotiate with your creditors to adjust the terms (amount, length, etc.) of the proposal.
  • Withdraw the consumer proposal and begin the process of filing for bankruptcy.
  • Withdraw the consumer proposal and seek out other debt solutions.

If you are considering consumer proposal or other debt solutions, it is always recommended that you speak with a professional credit counsellor to review your options. If you require a referral to such a  professional, contact Matrix Mortgage Global today.

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