Still, there is good news for people who choose to go through this process. Usually, consumer proposals are accepted with little to no incident, and even those that are regularly rejected often eventually get accepted. It is extremely rare for them to be rejected outright, but they may be for the following reasons.
Reasons Your Consumer Proposal May Be Rejected
Several reasons exist for the rejection of your consumer proposal. They include making offers that are too low, spending suspiciously before the proposal or having a history of fraudulent behaviour. We look at each of these reasons in more detail down below.
The Offer is Too Low
If the offer you make to any one of your creditors is too low, they may reject the consumer proposal. This may be because they expect to recuperate more of their initial loan or because they anticipate you having extra money to spend. Working with a Licensed Insolvency Trustee (LIT) can help ensure that your proposal is fair to both you and your creditors.
Your Actions Before the Consumer Proposal Are Suspect
If a creditor suspects that you are filing a consumer proposal suspiciously, they may reject the proposal. Expensive purchases in the time immediately before the filing of your consumer proposal is a good example of suspicious activity, but it may also look like spending all available money on new cards or similar behaviour.
You’ve Been Proven Guilty of Fraud or a Breach of Trust
If creditors can prove that you have a history of fraud or breaches of trust, they may reject your consumer proposal. These cases are fairly rare, and working closely with a suitably qualified LIT can make a big difference in how the proposal turns out.
What Happens When Your Consumer Proposal is Rejected
Although it is worth repeating how rare it is to have a consumer proposal rejected, it can also be helpful to understand what happens if a consumer proposal is rejected. Below, we look at the typical actions that occur during the 45-day period creditors have to accept or reject the proposal.
Renegotiation
Renegotiating with a specific creditor is a common practice during consumer proposals. This is most often the case when a creditor feels they are not being compensated fairly, and they will make this known to the LIT working on your file. Subsequent meetings between you and your LIT may be necessary to determine how to negotiate so that everyone feels satisfied with the agreement. Meeting of Creditors If more than one-quarter of your creditors reject your proposal, a meeting of creditors must be called. During this meeting, attempts will be made to satisfy all creditors and accept your proposal. This will usually involve the support and advice of your LIT and may require you to raise the amount offered in the proposal. Alternative Methods In the situation where your consumer proposal is rejected after a meeting of the creditors, the next step will be considering alternative methods of dealing with your outstanding debt. This may take the form of debt consolidation, credit counselling or filing for bankruptcy. These decisions should be made with the support and advice of your chosen LIT.
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