When you find yourself drowning in debt, a consumer proposal can be a lifeline that helps you regain control of your finances. A consumer proposal is a legal framework that allows you to negotiate a debt settlement with your creditors while avoiding bankruptcy. You can work with a licensed insolvency trustee, like J. Bottom & Associates in British Columbia, Canada, to create a proposal that addresses your financial situation and fits your budget. However, one question that many people have is whether creditors can reject a consumer proposal. In this blog post, we’ll explore this topic and provide you with some insights about what can happen if your proposal is not accepted.
What is a Consumer Proposal?
A consumer proposal is a legally binding agreement between you and your creditors wherein you would suggest an alternate repayment plan to settle your debt. This typically involves reducing the total amount of your debt, setting up a timeline for completion of the payments, and incurring no additional interest charges. Through the proposing body, trustees in bankruptcy, you can negotiate with all of your creditors for a mutually agreeable solution. The outcome of your consumer proposal will depend on their approval of your offer. By accepting and following through with your proposed payment plan, you can gain relief from overwhelming debt burden and have a chance at rebuilding your financial future.
Factors that Influence Consumer Proposal Acceptance
First, let’s take a look at how creditors can accept or reject a proposal. Once you file a consumer proposal, you will need to provide a written proposal to all of your creditors explaining how you plan to pay them back. Your proposal should show how you plan to settle your debts over a given time period, either through lump-sum payments or monthly installments. Your creditors will then have 45 days to vote on your proposal to accept it or reject it. To approve your proposal, creditors representing more than 50% of your total debt must vote in favor of it. If your proposal is rejected, your creditors can still attempt to recover their money from you through legal means, such as wage garnishments or asset seizures.
Why Are Consumer Proposals Rejected?
Now, you might be wondering what reasons creditors have for rejecting a consumer proposal. The most common reason for a proposal’s rejection is it is simply not feasible or realistic. If you don’t offer enough repayments or you don’t have a steady income stream to repay the debt and adhere to the proposal plan, your proposal won’t be deemed feasible. If your proposal leaves a creditor with a significant financial loss that would exist beside alternative debt solutions, then it would not receive approval. You must remember that your proposal must be fair, reasonable, and practical.
What Should You Do if Your Consumer Proposal is Rejected?
If your creditors reject your proposal or if you fail to comply with its provisions, the protection offered by the consumer proposal will no longer apply, and your creditors could pursue other collection methods through the court system. With that being said, a creditor can only refuse a proposal if they believe it is best for them, and this has more to do with the terms of the proposal than they do with you as an individual. Your trustee can explain your options and help you determine if filing for bankruptcy may be the best solution in your particular case.
So, what are your options if your proposal is rejected? You do have a few options available, and your licensed insolvency trustee can provide you with the proper guidance. You may be able to renegotiate your proposal with your creditors, submitting a more feasible agreement. If you have been denied outright, you can either declare bankruptcy or make arrangements to pay the debt in full by other means. If circumstances have changed, you can decide to withdraw your proposal and design a whole new proposal for your creditors.
How to Avoid Having Your Consumer Proposal Rejected
Consumer proposal rejections are rare (only 5% of proposals are rejected), but they do happen. Here are some tips on how to avoid having your consumer proposal rejected so you can get the debt relief you deserve:
Get Your Debts and Financial Details in Order
Before submitting your consumer proposal, it is essential to make sure that your debts and other financial details are in order. This means making a detailed list of your debts, including the names of your creditors, how much you owe them, and what kind of debt it is. You must also determine your monthly expenses and your monthly income. You should have a clear understanding of how much you owe and how much you can afford to pay back.
Make Sure Your Offer is Reasonable
A consumer proposal is essentially a payment plan. You propose to pay back your creditors a percentage of what you owe them over a set period. Your offer should be reasonable, meaning that you can afford to pay back the proposed amount. If your offer is unreasonable, your creditors are likely to reject your proposal. It is best to be conservative when proposing your payment plan, which means calculating your expenses and income realistically.
Get a Licensed Insolvency Trustee to Help You Out
The best way to avoid having your consumer proposal rejected is by working with a licensed insolvency trustee. They are experts in consumer proposals and can guide you through the entire process. They will help you put together your proposal and make sure that it is reasonable and that it adheres to the rules of the Bankruptcy and Insolvency Act. Your trustee will also communicate with your creditors and negotiate on your behalf. Their expertise can significantly increase your chances of having your proposal accepted.
Don’t Ignore Your Creditors
If you are behind on your debt payments, it can be tempting to ignore your creditors. However, ignoring creditors can lead to them rejecting your consumer proposal. Before submitting your proposal, try to negotiate with your creditors. Explain your financial situation and see if they are willing to work with you. If they see that you are making an effort to pay them back, they are more likely to accept your proposal.
Be Willing to Make Changes to Your Proposal
If your proposal gets rejected, don’t panic; you still have options. Your creditor will give you the reasons for the rejection in writing, and you can work with your trustee to make changes to your proposal. Be willing to make adjustments to your proposal if necessary, and resubmit it to your creditors for consideration. You can only do this once, so it’s essential to get it right the second time around.
Will I Have to Make Any Payments During the Proposal Process?
Once you file for a consumer proposal, you will stop making payments to your creditors. Instead, you’ll make regular payments to your LIT who will distribute the funds to your creditors. All payment plans are based on your financial situation, so the payments will be set at an affordable amount for you.
How Does a Consumer Proposal Affect My Credit Score?
It’s important to know that filing for a consumer proposal will affect your credit score. The proposal will remain on your credit report for three years after it’s completed or six years after the date it was filed, whichever is shorter. That being said, it is possible to rebuild your credit history following the completion of the proposal.
Contact J. Bottom & Associates Ltd.
Filing a consumer proposal is a good approach to a more peaceful financial life, but it’s important to understand that creditors can refuse a proposal. If your proposal is rejected, you will need to examine the reasons and determine what options you have. Your licensed insolvency trustee at J. Bottom & Associates can help understand your situation, your options, and provide you with the best possible advice that can help you get back on track. We hope that this blog post has helped you put your mind at ease and provided you with some useful information regarding consumer proposals in Coquitlam, Westminster and Vancouver, British Columbia. Don’t hesitate to contact us if you have any questions or require additional information.