If you’ve recently filed a consumer proposal, you might be waiting to find out whether it’s been accepted by your creditors. This can be a stressful time because there may be some uncertainty about what will happen if you have your consumer proposal rejected by your creditors. Find out what happens when your consumer proposal is rejected, and what other debt solutions you can consider if you can’t get it approved.
A consumer proposal is an agreement you enter into with a designated legal “trustee” (also called a Licensed Insolvency Trustee) that is designed to give you some relief from your debt and your creditors. It does this by forgiving a portion of the money you owe and setting a payment schedule that fits your budget.
Once your consumer proposal is accepted, you’ll only have to pay one easy monthly payment. Your credit score will go down to one of the lowest scores possible. This will affect your ability to apply for loans and other forms of financing until you build it back up again. A note that you had a consumer proposal will also stay on your credit report for up to 3 years after you pay it off, which will keep your credit score low for that amount of time.
Your Licensed Insolvency Trustee will work with you to negotiate an agreement to submit to your creditors. Once the agreement is submitted, your creditors will have 45 days to accept or reject your offer. The majority of your creditors (75% or over) will need to accept the agreement for it to proceed.
If 75% of your creditors vote for your consumer proposal to pass, the creditors that voted “no” will have to abide by the agreement as it has been laid out. If more than 25% of your creditors vote to reject your offer, they’ll need to have a special meeting to negotiate different terms for your consumer proposal.
If your consumer proposal is rejected, don’t worry. This might just mean you need to tweak it a little bit before it’s deemed acceptable by your creditors. The main reasons your creditors might reject your consumer proposal are because you’re not offering enough money or because you’ve offered an unsuitable term for your repayment schedule. In this case, your creditors will usually request changes to the terms that you’re offering. They may also meet as a group to figure out how they can find a collective solution and negotiate a plan of action to help you resolve your debt.
What terms will my creditors want to make changes to?
Your creditors may reject your proposal because they want to make amendments to it. The main terms that typically need to be adjusted before your proposal is accepted include the following:
Example: Todd and Sally have been married for three years and together have accumulated a debt of $54,000. Sally works a part-time job while Todd was recently laid off from his job as a construction worker. Since they can’t meet their debts, they file for a consumer proposal offering their creditors $23,000.
Their creditors reject the offer but advise that they would be willing to accept $38,000. The couple demonstrates that they can’t afford this offer by submitting a budget and supporting documentation about Todd’s layoff. They counteroffer $32,000 and their creditors have a meeting to discuss these terms. At the meeting, the majority of their creditors accept the amended amount and approve the consumer proposal.
To file a consumer proposal, you’ll need to meet the following eligibility criteria in most cases:
Before your trustee can decide if a consumer proposal is the best fit for your needs, you may need to supply the following documents:
If you can’t get approved for your consumer proposal, there are a number of other options you can pursue:
| Response | Saskatchewan | Prince Edward Island | Ontario | Nova Scotia | Newfoundland and Labrador | New Brunswick | Manitoba | British Columbia | Alberta |
|---|---|---|---|---|---|---|---|---|---|
| Mortgage (principal residence) | 35.9% | 20% | 30% | 23.53% | 16.67% | 33.33% | 43.48% | 24.32% | 25.85% |
| Car loan(s) | 30.77% | 40% | 25.1% | 29.41% | 33.33% | 25.93% | 21.74% | 24.86% | 28.57% |
| Credit card(s) | 25.64% | 20% | 36.86% | 44.12% | 33.33% | 48.15% | 21.74% | 41.62% | 38.1% |
| Payday loan | 17.95% | 20% | 14.51% | 11.76% | 16.67% | 14.81% | 15.22% | 14.05% | 12.24% |
| Mortgage (investment property) | 12.82% | 10% | 8.82% | 11.11% | 14.81% | 15.22% | 7.57% | 8.16% | |
| Mortgage (vacation property) | 12.82% | 20% | 8.63% | 2.94% | 7.41% | 13.04% | 7.57% | 8.16% | |
| Personal loan | 12.82% | 20% | 15.69% | 5.88% | 16.67% | 18.52% | 21.74% | 18.38% | 21.09% |
| Investment loan (or line of credit used for investment purposes) | 10.26% | 20% | 6.27% | 5.88% | 3.7% | 8.7% | 7.57% | 4.08% | |
| Personal line of credit | 10.26% | 20% | 7.65% | 8.82% | 5.56% | 11.11% | 6.52% | 11.89% | 11.56% |
| Student loan(s) | 7.69% | 15.69% | 20.59% | 22.22% | 18.52% | 17.39% | 12.97% | 17.01% | |
| Business loan (or line of credit) | 5.13% | 6.67% | 5.88% | 16.67% | 7.41% | 2.17% | 5.95% | 6.8% | |
| Buy Now Pay Later (store or credit card installment plan) | 5.13% | 6.86% | 2.94% | 2.17% | 4.32% | 3.4% | |||
| Debt collection / consumer proposal | 2.56% | 4.71% | 5.88% | 8.7% | 3.24% | 6.12% | |||
| Home equity line of credit (HELOC) | 2.56% | 1.96% | 2.94% | 0.54% | 1.36% | ||||
| Line of credit | 2.56% | 4.51% | 8.82% | 5.56% | 7.41% | 2.17% | 9.73% | 6.12% | |
| Retail card(s) | 2.56% | 2.75% | 3.7% | 2.7% | 2.72% |
Your creditors will have 45 days to approve or reject your consumer proposal once it’s filed. If your proposal is rejected, you may be able to submit another offer with amended conditions. If you can’t negotiate new terms, you may need to consider other debt solutions like working with a debt relief provider that may be available to you under these circumstances.
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