Consumer Proposal Creditors Vote
With the lifestyle that most households live, you’ll find that most households obtain credit for the acquisition of various items or for some future plans.
Credit cards are common, as well as store cards, and payday loans.
At one time or another household use these form of credits and can have multiple that sustain their lifestyle.
The problem arises when you accumulate too much debt on such unsecured loans that it becomes difficult to clear the balance when they’re due.
At this point, you might feel the need to file a Consumer Proposal to relieve some burden brought by the debt.
A Consumer Proposal is a legal procedure managed by the Office of the Superintendent of Bankruptcy (OSB).
You need to find a trustee who will assess your financial situation.
Then, you and the trustee will make a proposal to your creditors for the best solution that will allow you to repay the loan taking into consideration your financial circumstances.
A Consumer Proposal always involves making a certain percentage of the payment, while the rest of the debt is forgiven.
Once your creditors receive the proposal, The Bankruptcy and Insolvency Act gives them 45 days to study the proposal and provide a response either accepting, refusing, or seeking some sort of amendments before accepting.
If during that period the creditors do not respond, then the OSB will consider the proposal as accepted.
Obviously, you might not have just one creditor, probably two or more.
Your proposal is accepted if it obtains the majority of the vote in favor.
Creditors voting on the Consumer Proposal
Once the trustee has sent the Consumer Proposal to your creditors, they have 45 days to respond.
During that time you’re protected, they cannot take any action against you and you do not make your monthly payments.
After that period, each of your creditors should have sent their verdict to your trustee.
They can vote either for accepting the proposal, against the proposal, or they can abstain from voting.
The trustee will then proceed to count the votes.
For the Consumer Proposal to be accepted, the majority of the creditors should vote for the proposal.
The voting is such that:
- Each creditor is entitled to a single vote for every dollar you owe;
- For the vote to be accepted the creditor will submit a Proof of Claim;
- If the creditor does not vote, the Consumer Proposal is considered as accepted by that creditor.
For example if you owe $30,000 in total and $10,000 is owed to creditor A, $5,000 to creditor B, $7000 to creditor C, and $8,000 to creditor D, each creditor will have that many votes.
During the consumer proposal vote, if creditor A and B vote for accepting the proposal, creditor C votes against and creditor D abstains, the proposal will be accepted because the majority of dollars voted to accept the proposal.
If no conclusive vote is reached, the trustee and the OSB may suggest that you arrange a meeting with your creditors to convince them for the direction of their vote.
Occasionally, your creditors, themselves, will seek to arrange a meeting sometime during the 45 days.
What if Your Proposal is refused?
If your proposal is refused by the creditors, you may want to work with the trustee to amend the proposal.
You can then re-submit the amended proposal to your creditors.
However, this rarely occurs for two reasons.
First, the trustee is experienced with working with creditors across Quebec and will know how to structure a proposal that has a 99% chance of being accepted.
Secondly, your creditors will be better off than if you go bankrupt so they are often inclined to accept any reasonable proposal offer.
The trustee will only agree to send a proposal to your creditor if he/she believes it’s the best solution.
Your financial situation must afford you the ability to draft a reasonable proposal.
Often debtors repay about 30% of their total unsecured debt in a proposal.
If no changes seems possible, your only other alternative is to file for bankruptcy.
Conclusion on Creditors Vote on the Consumer Proposal
Once the votes have been counted and indicate that the Consumer Proposal has the majority of the vote from the creditors, it is then accepted.
The trustee will forward all the results regardless to the Office of the Superintendent of Bankruptcy.
The OSB will then make the Consumer Proposal legally binding and you will have to adhere to the terms.
If for any reason you default on your responsibilities, you cannot make another proposal.