What Are Consumer Proposals?
Consumer proposals are a way for consumers to get out of debt with federal oversight. All consumer proposals are overseen by a Licensed Insolvency Trustee (LIT) who is licensed by the Office of the Superintendent of Bankruptcy (OSB). These proposals accomplish several goals, including:
Stopping garnishmentsReducing income taxesStopping debtor and collection callsReducing interest ratesExtending pay periodsReducing total amount owed by up to 90%
What Part Do Creditors Play in Consumer Proposals?
Creditors play a fairly significant role in the process, but perhaps not as much as you might think. After the proposal is sent, more than half of your creditors must agree to the terms before it is accepted. However, once more than half agree, all creditors are bound to the agreement. This is a great boon for consumers as it makes it easier for proposals to go through. Otherwise, creditors may not even be involved with other creditors in the decision-making process. Completing the application, filing it and sending it off for approval are all actions that occur between you and your chosen LIT. It is worth noting that creditors only have 45 days to review and accept your proposal.
Why Consumer Proposals Are Rejected
Several reasons may be the cause of a consumer proposal’s rejection. Incorrect filing or missing paperwork would be one of the most common reasons for rejection. Additionally, not using the services of an LIT may also cause the proposal to be rejected. However, when it comes to a properly completed proposal, the chances of rejection are slim.
Why Consumer Proposals Are Usually Accepted
Consumer proposals are good for both the debtor and the creditor. In most cases where a person is looking to complete a consumer proposal, they’ve already exhausted their other available options. So, these situations often boil down to a binary decision for the creditor. Either they accept the proposal and take a reduced sum or they reject it and risk their debtor filing for bankruptcy. In the second scenario, they can only stand to lose the money already lent.
How Often Are Consumer Proposals Rejected?
Ultimately, it is very unlikely that a consumer proposal will be rejected because the alternative does not benefit either party. While small clerical issues may cause delays in the filing or acceptance of these proposals, most will be accepted without much issue.
What Happens if a Consumer Proposal is Rejected?
If the 45 days pass without acceptance by the creditors, the next step will be determining counter offers. Some creditors may expect extra money on monthly payments or other stipulations as necessary. If everyone agrees to the counter offer, then the consumer proposal will still be accepted.
