Do Creditors Usually Accept a Consumer Proposal?

Consumer Proposals filed by Sands & Associates’ Licensed Insolvency Trustees have up to a 99% success rate. Learn how making a Consumer Proposal can consolidate and cut your debt up to 80% or more without borrowing, and how the process of negotiating your debt reduction with your creditors typically happens.

Managing Debt With a Consumer Proposal

A Consumer Proposal can consolidate virtually all your debts without borrowing and offer to repay your creditors the portion of your debt that you can afford over a period of up to five years. You may be able to reduce your debt by as much as 50-80%, as your creditors will agree that the unpaid balance will be considered forgiven at the end of your Consumer Proposal.

• Consumer Proposals are one of only two options available to Canadian consumers that can forgive almost any type of debt, including:
  • Basic consumer debts like credit cards, payday loans, lines of credit, overdrafts.
  • Government debts such as outstanding income taxes, CERB overpayments, student loans, and more.
• Because your debts are frozen and the balance that you’ll repay (interest-free) is usually substantially reduced, your new monthly debt payments should be much more manageable than if you continued trying to make your monthly payments as before – and you’ll have a clear ‘debt-free’ date because Consumer Proposals are limited by law to a period of 60 months or less.

Your credit score or history are not qualifying factors, and a Consumer Proposal can be made by an individual who owes between $1,000 and $250,000 of debt excluding any mortgages on your residence.

• If you owe more than $250,000 there’s another type of Proposal that may be more suitable, and some different rules will apply.
• A joint Consumer Proposal can be filed by two people together (i.e. couples, business partners, etc.), doubling the upper limit to $500,000.

Read More About Debts a Consumer Proposal Can Consolidate

Consumer Proposals also offer flexibility in that you can choose to manage ‘secured debts’ (that is, debts linked to an asset) outside of your Proposal. For example, if you have a financed vehicle or a mortgage in good standing and you want to continue with those agreements, you can do so uninterrupted. As long as you continue to make the payments on your car and/or home, a Consumer Proposal will allow you to retain those assets without issue.

Sands & Associates’ Approach to Consumer Proposal 

Sands & Associates works with Consumer Proposal clients across British Columbia – here’s the approach we take with our clients:

1. Have a free, confidential, non-judgmental consultation. In this initial meeting (which could be in person at a local office near you, over the phone, or online) we’ll take time to understand your situation, needs, and goals. We’ll talk with you about all your options, including Consumer Proposals.

If you decide that a Consumer Proposal is the best fit for you and your situation, we’ll work together to determine an offer that is affordable for you, and that your creditors are likely to agree to.

2. When you’re happy with the plan, you’ll have another meeting to review and sign the Proposal documents that we’ve prepared on your behalf.

After this your Licensed Insolvency Trustee will file your Proposal with the Office of the Superintendent of Bankruptcy, the government branch that oversees this process, and send your offer to your creditors for their consideration.

3. Your creditors will have 45 days to review and consider your Consumer Proposal offer and will submit a formal vote to your LIT confirming if they are willing to accept it.

Immediately after signing the Proposal documents, you should no longer be making payments to your creditors and your LIT will take on all communications with your creditors on your behalf, so you don’t need to deal with them further.

When your Consumer Proposal is accepted you’ll make the payments you offered, complete two private, one-on-one financial counselling sessions, and fulfill any other conditions you agreed to – and at the end you’ll be issued a ‘Certificate of Full Performance’ and legally released from all debts that you included in your Consumer Proposal.

Learn More About Starting the Consumer Proposal Process

Are Consumer Proposals Usually Accepted by Creditors? What Happens if They Don’t Agree? 

While your creditors do get to vote on whether they will agree to your Consumer Proposal, it can be reassuring to know that Proposals filed by Sands & Associates are almost always accepted – it’s quite rare for a Consumer Proposal to be rejected. One of the main reasons for this high rate of acceptance is that in a Consumer Proposal you are providing your creditors a better return on your balance than if you were to file for bankruptcy, which, in most cases, would result in creditors receiving nothing.

Your creditors have 45 days to consider your Consumer Proposal, file a ‘proof of claim’ with your LIT and vote. They may:

• Vote to accept your offer as filed (the debt repayment, time you’ll have to make your payments, and other terms that may be offered by you)
• Vote against your offer
• Vote against your offer as filed and ask to have a ‘meeting of creditors’
• Not vote at all (nor even file a proof of claim)

If the majority of your participating creditors (over 50% by dollar value) vote to accept your offer the Consumer Proposal will be legally binding and provide you full protection from all the creditors you included in your Proposal – even those who didn’t vote, file their claim, or who voted against your offer. For example:

• If you owe a total of $25,000 to five different creditors and only two of them who are owed a total of $15,000 vote to accept your Proposal, it will be accepted and binding on all five creditors, even if the other three (holding $10,000 of the total debt) vote against it.

How Much Debt Will a Consumer Proposal Eliminate? Learn More

Meeting of Creditors

Your Proposal can only be rejected at a meeting of creditors, and a meeting of creditors will be held within 21 days if one is requested by one (or more) of your creditors who are owed 25% or more of the total value of your proven debts.

This meeting offers an opportunity to negotiate different Proposal terms that can help your Proposal pass if one or more creditors were not happy with your original offer, and/or provide more information about your situation. At this meeting your creditors will vote to accept or refuse your Proposal, again the outcome is decided by a majority by dollar value – and in the event there is no quorum of creditors at your meeting, your Proposal is deemed to be accepted.

• In a less common case where your original Proposal isn’t accepted within the 45-day period, your creditor(s) may by more likely to accept a revised Proposal that offers more return to them, generally achieved by either increasing your monthly payment amount, or extending the time of your monthly payments.
• Prior to the meeting your Licensed Insolvency Trustee will continue to communicate with your creditors on your behalf and work to determine what terms your creditors would accept.

In the rare case that your Consumer Proposal is rejected, you have a few options to consider, including whether to amend your Consumer Proposal and refile it, or whether declaring bankruptcy is a better option for you. Your Licensed Insolvency Trustee can help you explore these remedies further and weigh the pros and cons of your options. 

What Are My Options if I’ve Done a Consumer Proposal Before?

Talk to a Licensed Insolvency Trustee About Filing a Consumer Proposal 

A Consumer Proposal can be a great solution to get a handle on problem debt – they are almost always accepted and offer many benefits compared to other solutions including consolidation loans and credit counselling repayment plans, both of which can have considerable limitations and high costs.

To do a Consumer Proposal you must work with a Licensed Insolvency Trustee, no other debt advisor can file one for you, and you can’t file one by yourself. No referral is required to talk with a Licensed Insolvency Trustee and there is no impact to your credit history either. To explore whether a Consumer Proposal could be a good fit for your situation and talk about other solutions you may want to consider, reach out to a Licensed Insolvency Trustee local to you.

• All Licensed Insolvency Trustees will offer you a free, confidential consultation and we are Canada’s official debt help experts, fully qualified and endorsed to help you find debt solutions.
  • If you’ve been advised against a Consumer Proposal by anyone other than a Licensed Insolvency Trustee, it is strongly recommend you see a LIT for a second opinion.
• LITs are neutral parties, and we will help you understand all your options. No two situations are exactly alike, and considerations can include how much debt you have, who your creditors are, as well as your income, household situation and other factors specific to you.

We understand it can feel difficult to reach out for help, and our goal is to offer you information and support in a caring, straightforward and empathetic manner. By the end of your consultation you should have a clear outline of your next steps in your debt-free plan.

Connect with a non-judgmental BC Licensed Insolvency Trustee and get started with a debt-free plan that works for you – book your free, confidential debt consultation with Sands & Associates now.