Do creditors typically accept consumer proposals in Canada?

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In Canada, creditors often accept consumer proposals because they’re seen as a good way to recover some debt compared to bankruptcy. A well-structured proposal shows the debtor’s ability to pay a portion of what’s owed, and about 90% get accepted with the help of a licensed insolvency trustee.

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Question

Do creditors usually accept consumer proposals? I’m trying to figure out if creditors are generally open to these proposals. If I’m going to put in the effort, I really want to know if there’s a good chance they’ll agree to it. What are the odds?

From: Anonymous Question, New Brunswick (NB)

Debt Insiders Answer

In Canada, creditors are generally pretty open to consumer proposals. They see them as a good way to recover some of what’s owed rather than going the bankruptcy route. A consumer proposal lets people work out a deal where they pay less than the full amount they owe, which creditors often prefer. While success rates can vary, creditors tend to accept proposals when the offer is fair and the debtor can back it up with the ability to pay. To avoid the losses linked with non-payment or bankruptcy, well-structured proposals presented by a licensed insolvency trustee usually get the green light about 90% of the time.

From: Anonymous Question

Office of the Superintendent of Bankruptcy (OSB) Answer

Creditors are generally open to accepting consumer proposals because they often prefer this option over personal bankruptcy, which could result in a more significant loss. According to the Bankruptcy and Insolvency Act, a consumer proposal must be accepted by creditors holding at least 50% of the total debt in order to be binding (Section 66.1). The likelihood of acceptance can vary based on factors such as the offered percentage of repayment and the overall financial situation of the debtor. Typically, if the proposal is reasonable and offers creditors a better recovery than they would receive in bankruptcy, there is a good chance of acceptance.

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 acceptance of consumer proposals, based on common queries and concerns:

1. When will I know if the Consumer Proposal is accepted?

Your creditors have 45 days from the filing date to vote for or against the proposal, and a majority by dollar value must vote in favour for it to be accepted[1][2][5].

2. What happens if my creditors do not accept the Consumer Proposal?

If your creditors do not accept the proposal, you may change the terms of your proposal or make a counter-offer, or consider other debt solutions like bankruptcy[2][5].

3. Can I negotiate with creditors if they reject my Consumer Proposal?

Yes, you can negotiate with creditors who reject your proposal to try to obtain their agreement, and a meeting of creditors may be held to discuss an amended proposal[1][2][5].

4. Do I have to include all my creditors in the Consumer Proposal?

Yes, you cannot pick and choose which debts to include; a consumer proposal must include all unsecured debts, except for certain debts like student loans less than 7 years old and support obligations[2][3][5].

5. How long do creditors have to vote on a Consumer Proposal?

Creditors have 45 days from the date the Consumer Proposal is filed to vote for or against the proposal; if they do not respond within this period, they are deemed to have accepted the proposal[1][2][5].

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

References

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