Understanding Consumer Proposal: Actions After 45 Days

Understanding Consumer Proposal: Actions After 45 Days

A consumer proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). The process is designed to allow Canadians who are unable to repay their debts in full, an opportunity to come to a compromise with their creditors. The proposal typically involves making one manageable monthly payment over a specified period of time, after which the remaining debt is forgiven. However, the initial stages, including the crucial 45-day period after filing a consumer proposal, are often not well understood, despite their significance in determining the proposal’s success.

What Happens in the First 45 Days?

Upon filing a consumer proposal, there is an automatic stay of proceedings. This immediately stops most creditors from being able to take legal action against you to collect debts. The stay provides a protective shield while the proposal is under consideration. During the first 45 days following the filing, creditors have the opportunity to request a meeting or vote on the proposal. This period is critical as it sets the stage for whether the proposal will be accepted, amended, or rejected by the creditors.

Actions After 45 Days

Scenario 1: No Objection or Meeting Request

If no creditor owning at least 25% of the total debt requests a meeting within the 45-day period, and there are no objections, the proposal is deemed accepted by the creditors. This does not require any further action from the debtor regarding acceptance. However, it’s important to adhere strictly to the terms laid out in the proposal from this point onwards. Failing to make payments as agreed can lead to the annulment of the proposal and potential legal action from creditors.

Scenario 2: Creditors’ Meeting Requested

If creditors representing at least 25% of the debt request a meeting, one will be scheduled. At this meeting, creditors will vote on the proposal – it can be accepted, amended with the debtor’s consent, or rejected. It’s crucial for debtors to be prepared for negotiation during this meeting and to consider the concerns of the creditors. A successful vote for the proposal—as per the rules, a majority in dollar value of the creditors who vote at the meeting—means the proposal is accepted and becomes binding to all unsecured creditors.

Scenario 3: Proposal Rejection

In the event the proposal is rejected, debtors have a few options. They can try to modify the proposal and resubmit it, considering the feedback received from creditors. Alternatively, they might have to consider other debt relief options, including bankruptcy. It’s vital to consult with the LIT to understand the best course of action based on individual circumstances.

Continuing After Acceptance

After a consumer proposal is accepted (whether automatically after 45 days or through a creditors’ meeting), there are actions the debtor needs to undertake. Firstly, adhering to the repayment schedule is paramount. Failure to make three payments (or three months’ worth of payments if paying monthly) can result in the proposal being annulled. Additionally, debtors are usually required to attend two financial counseling sessions to help them manage their finances more effectively in the future.

Conclusion

Navigating the period after filing a consumer proposal, especially the 45-day window and its aftermath, involves understanding the potential outcomes and preparing for them. Whether the proposal is accepted automatically, goes through a meeting process, or gets rejected, knowing the steps to take can help manage the situation more effectively. It also underscores the importance of closely working with a Licensed Insolvency Trustee, who can provide guidance and support throughout this process. A consumer proposal can offer a fresh start, but it’s up to the individual to stay committed to the terms and use the opportunity to build a stronger financial future.

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