Can creditors deny a consumer proposal?

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Your consumer proposal might hit the skids if the creditors aren’t on board. You need their blessing—at least 51% of them—to give it the green light. If your repayment plan seems too stingy or unrealistic, or if there are discrepancies in your financial disclosure, it may face rejection. But don’t fret—well-crafted proposals that consider creditors’ expectations usually get the go-ahead.

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Question

Can you be denied a consumer proposal? I’m a bit nervous about the possibility of getting denied. I’d love to understand why a consumer proposal might not be accepted and what I should be prepared for. How common is it to get turned down?

From: Anonymous Question, Alberta (AB)

Debt Insiders Answer

A consumer proposal might get the thumbs down for a few reasons, but the biggie is whether your creditors give it the nod. You need creditors holding at least 51% of your debt to say “yes” for it to pass. If your repayment plan seems like it’s low-balling or just doesn’t match up with what your creditors think you can realistically pay, they might not be on board. Plus, if your financial details are fudged or you don’t tick all the boxes under the Bankruptcy and Insolvency Act, like having enough income or following the rules, that could lead to rejection too. But don’t sweat it too much—proposals usually get approved if they’re crafted well and consider what creditors want.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

Yes, a consumer proposal can be denied. Common reasons for denial include insufficient creditor support, failure to provide necessary documentation, or not meeting statutory requirements under the Bankruptcy and Insolvency Act (BIA).

According to Section 66.1 of the BIA, a consumer proposal must be accepted by the majority in number and value of the creditors. If this threshold isn’t met, the proposal will not be approved. Additionally, if the proposal is deemed not feasible or if the debtor fails to comply with the requirements for making a proposal outlined in Section 62 of the BIA, it may also be rejected.

It is relatively uncommon for consumer proposals to be denied if properly prepared and supported by creditors, but it can happen. Prepare by ensuring that your proposal is realistic, backed with the necessary financial disclosures, and includes terms that are likely to be acceptable to your creditors.

From: This answer is provided by scanning the OSB Bankruptcy & Insolvency Act and related directives

Related Questions

Here are the top 5 most frequently asked questions related to the denial of a consumer proposal, based on the provided sources and general online trends:

1. Can a consumer proposal be rejected?

Yes, a consumer proposal can be rejected if more than 50% of your creditors vote against it[2][4][5].

2. Why are consumer proposals rejected?

Consumer proposals are rejected if the payment offer is too low, if you can’t make the proposed payments, or if there are concerns about income stability or asset values[1][4][5].

3. What happens if my consumer proposal is rejected?

If your consumer proposal is rejected, you can renegotiate the terms, accept a counter-offer, withdraw the proposal and file for bankruptcy, or pursue other debt relief options[2][4][5].

4. Can I withdraw my consumer proposal if it is rejected?

Yes, you can withdraw your consumer proposal anytime prior to its deemed rejection or at the meeting of creditors[2][4].

5. Will a rejected consumer proposal affect my credit report?

Yes, a rejected consumer proposal will remain on your credit report for six years from the date of filing[4][5].

If you have a question about debt see our debt questions or ask your own debt related question.

References

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