Life can be unpredictable, and we can all end up in a spot we never planned on being. If you have found yourself struggling financially, and are unable to get out of the cycle of debt, you may be interested in filing a consumer proposal. A consumer proposal is a legally binding agreement between you and your creditors that allows you to reduce the amount you must payback. This reduction only occurs once the consumer proposal is accepted by the majority of your creditors. So how does voting in a consumer proposal work?

Voting in a consumer proposal

What happens when you file a consumer proposal?

One of the benefits to filing a consumer proposal is the stay of proceedings that goes into place. Your Licensed Insolvency Trustee (“LIT”) registers the file with the government and the notice of stay goes into place as soon as you file. 

The stay of proceedings goes into place so that all of your creditors are treated equally, and so that creditors can’t suddenly start any kind of action (or continue any ongoing action they may have already started). This means that all unsecured creditors have to stop collection activity against you (this includes phone calls, written warnings, putting accounts into collections or garnishing your wages). You also don’t need to continue making those debt payments during the voting process. All the creditors can do at this point is vote on the consumer proposal, and they can choose to accept or decline what is being offered.

The voting process

Once your LIT files your consumer proposal with the Office of the Superintendent of Bankruptcy, they mail a copy to all of your unsecured creditors. Every creditor has a right to vote whether they want to accept or reject your proposed terms. The creditors get one vote for every dollar they are owed. There are special rules for those who are related to you when it comes to the voting process. They can submit a claim to participate but they are only allowed to vote against or not vote at all.

In order to submit their vote, the creditors must submit a valid proof of claim that proves the debt owed to them. The voting takes place for the 45 days immediately following the filing of the consumer proposal, and this includes weekends and holidays. At this 45 day mark, the LIT reviews all the claims to see which are eligible to vote. When voting on the consumer proposal, the creditors will vote in one of the following 4 ways:

– Vote “yes” and accept the proposal, or

– Vote “no” and not accept the proposal, or

– Vote “no and ask for a meeting of creditors” (to review more or make a counter offer)

– No vote at all (they can still participate in the consumer proposal, provided they filed a valid proof of claim)

When is a meeting of creditors held?

When more than 25% of the dollar value of your claims submit a request for a creditors meeting, the LIT must hold a meeting within 21 days to discuss or review the terms (e.g. if you owe $10,000, a meeting will be called if creditors holding at least $2,500 worth of the debt call for one). If a meeting is called, the creditors have until that meeting to finalize their votes. Although the term “meeting of creditors” sounds like a formal gathering, it’s actually more of a technical term that represents the counting of the votes.  

Voting in a consumer proposal

How do I know the consumer proposal is accepted?

If the meeting of creditors is necessary, it is through this meeting and subsequent negotiations with your creditors that an amount will be settled on that works for both sides. If less than 25% of the creditors were to request a meeting, your consumer proposal is automatically accepted at the 45-day point.

Are you constantly struggling with debts? A consumer proposal may be of interest to you. Contact us to schedule your free 45-minute consultation, and we can start working together towards your FreshStart!