Can Creditors Reject a Consumer Proposal?

A Look at the Consumer Proposal Voting Process & What Happens When Creditors Vote No

While rare, creditors can reject a consumer proposal, and it can often leave you feeling stressed, anxious, and helpless.

But don’t worry just yet—even if they do reject your consumer proposal, your terms can still be negotiated. And your Licensed Insolvency Trustee can help you find alternative options if you can’t agree upon new terms with your creditors.

To help you achieve some piece of mind, here’s a look at the voting process for consumer proposals, why your creditors might vote no, and what happens if they do reject your consumer proposal.

What Is A Consumer Proposal?

A consumer proposal is a formal debt settlement agreement made with your creditors and administered by a Licensed Insolvency Trustee to help reduce your outstanding debt. It is meant to be a preferred alternative to bankruptcy for both consumers and creditors.

If your creditors accept the proposal, it becomes a legally binding agreement between you and your creditors. And once you pay off the agreed-upon amount , your creditors agree to eliminate the remainder of your debt.

Any individual who is insolvent and owes less than $250,000—excluding their mortgage—is eligible to file a consumer proposal to manage their debts in Canada.

Based on your income, assets, debts, and budget, your trustee will evaluate your financial situation and determine the amount creditors would receive if you filed an assignment in bankruptcy. They would also see how much you can afford to pay each month, which will help create a payment plan for your consumer proposal.

Proposal payments can be spread out over a maximum of 60 months. But if you can afford to pay more each month, you can shorten the payment term and pay off your consumer proposal early. You may also pay a lump sum if you come into extra money.

Once your trustee files your consumer proposal, you will have legal protection from your creditors. All legal action against you will stop, and you will no longer have wage garnishments, phone calls, or required payments to unsecured creditors.

Also, once the proposal is filed, the creditors have 45 days to respond to the trustee to request a meeting of creditors, if they wish the proposal to be voted on. If a meeting of creditors is not requested within the 45-day period by one or more creditors owing at least 25% of the proven claims, the consumer proposal will be deemed approved by the unsecured creditors. If a meeting is requested by one or more unsecured creditors with claims of 25% or more, the trustee must call a meeting of creditors. At the meeting of creditors, the consumer proposal will be tabled and either accepted or rejected by the unsecured creditors’ votes.

How The Voting Process Works

When the creditors receive notice from the trustee that a meeting of creditors has been called, they may attend the meeting in person or send in voting letters to the trustee to participate in the vote. Creditors may:

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  • Accept your terms and vote yes for acceptance of the consumer proposal;
  • Reject your terms and vote no against the consumer proposal;
  • Vote no and request changes to the terms; or
  • Abstain from voting—in other words, do nothing.


At the meeting of creditors, the trustee will review the votes. Based on the results of the votes, they will determine if the creditors have accepted the consumer proposal. For the consumer proposal to be accepted, the majority of the voting creditors’ claims (based on the dollar value) must have voted for approval of the consumer proposal. If the consumer proposal is approved, it is binding on all unsecured creditors.

Keep in mind that each unsecured creditor gets one vote for every dollar that you owe them.

If the majority of unsecured creditors, in dollars, vote against the consumer proposal, the trustee will review for counter-offers from the creditors. And if there are counter-offers, the trustee will review these offers with the debtor, including the pros and cons of accepting, rejecting, or making another counter-offer. The meeting of creditors can be adjourned to amend the consumer proposal and correspond with the creditors.

Can Creditors Reject the Consumer Proposal?

Yes, creditors can reject the consumer proposal, though it is rare. But when they do reject it, they often do so with a counter-offer. If they make a counter-offer, you can either accept or reject it or make another counter-offer.

Reasons Creditors Will Reject A Proposal

Most creditors will prefer a consumer proposal over bankruptcy since they will receive more of what they’re owed. But the Debtor must show that they are offering the most that they can afford to pay through the consumer proposal. They might reject the proposal if the amount offered is too low. But if you can show that bankruptcy is your only other option to help you with your debt, and you are offering a sufficient amount to the creditors, the consumer proposal will likely be accepted.

What Happens When Creditors Vote No

If you can’t agree upon the consumer proposal terms with your creditors and the consumer proposal is rejected, speak with your insolvency trustee about other options available for you. Bankruptcy might be your best option to solve your financial problems. Otherwise, it’s worth trying to negotiate with your lenders so you can agree on a payment that is reasonable and affordable.

Though the risk of creditors rejecting a consumer proposal is low, it can happen. But with the help of a Licensed Insolvency Trustee, they can find a reasonable proposal offer that will appeal to both the creditors and your budget, so you can pay off your debts and rebuild your credit faster.

Visit our Consumer Proposal page for answers to other frequently asked questions.