Resources for Creditors
- What is a consumer proposal and how does it affect creditors?
- Meetings of creditors
- What happens if the proposal is accepted or rejected?
- Closing the proposal
- Complaints and appeals
What is a consumer proposal and how does it affect creditors?
Consumer proposals are offers made by debtors under the Bankruptcy and Insolvency Act (BIA) to modify their payments to creditors. For example, debtors may propose paying a lower amount each month over a longer period of time, or paying a percentage of what they owe. Such a proposal must be completed within five years.
If you are an unsecured creditor, a consumer proposal stops you from
- taking or continuing legal action to recover your debts (such as seizing property or garnisheeing wages) until the proposal is withdrawn, rejected (by the creditors or the Court) or annulled, or the trustee is discharged because the proposal was not fully performed;
- using the debtor's filing of the proposal as a reason for terminating or amending any agreement you have with the debtor; or
- discontinuing service to the debtor, if you are a public utility.
However, you may take legal action to recover certain debts that are not affected by a proposal, such as unpaid alimony.top of page
The procedure begins when a debtor seeks the help of a bankruptcy trustee. The trustee will ask the debtor about his or her financial situation and the cause of the insolvency, and advise the debtor on what type of proposal to make. The trustee will then file the required documents with the Office of the Superintendent of Bankruptcy (OSB).
Within 10 days of filing, the trustee must send the OSB a report containing his or her opinion of the fairness of the proposal and the ability of the debtor to follow its terms. The report must also list the debtor's assets, debts and creditors. At the same time, the trustee must send copies of the proposal and report to each creditor, asking the creditors to accept or reject the proposal.
Creditors are then given 45 days to accept the proposal or reject it by sending a note to the trustee or by voting against it at the meeting of creditors. (If you do not respond, you are considered to have accepted the proposal.)top of page
Meetings of creditors
A meeting of creditors is not mandatory in a consumer proposal, but the Office of the Superintendent of Bankruptcy may request one. Creditors who make up at least 25 percent of all proven claims may also request a meeting.
At the meeting, creditors may vote to accept or refuse the consumer proposal as filed or as altered at the meeting.
Also at the meeting, depending on the terms of the proposal, the creditors may appoint up to three inspectors to represent them before the trustee during the administration of the proposal. Their powers are set out in the proposal.
For more information, read the Inspectors' Handbook.top of page
What happens if the proposal is accepted or rejected?
If a majority of creditors vote to accept the proposal (each creditor has one vote for each dollar of his or her proven claim) and the proposal is subsequently approved by the Court, it becomes binding on the debtor and his or her creditors. You would then be eligible to receive interim dividends according to the terms of the proposal.
If the proposal is accepted, the Office of the Superintendent of Bankruptcy (OSB) or any other interested party has 15 days to ask the trustee to apply to the Court to have the proposal reviewed. The court may reject the proposal if it finds that the terms of the proposal are not reasonable or fair to the debtor or the creditors. However, if no request is made within 15 days, the proposal is considered approved.
The debtor is no longer protected if the proposal is
- rejected by the creditors or the Court; or
- annulled by the Court or deemed annulled because the debtor failed to comply with the terms of the proposal.
This means that, as a creditor, you would then be able to take legal steps to recover your debts.top of page
Closing the proposal
Closing a consumer proposal begins when the trustee sends a final statement of receipts and disbursements (SRD) and a dividend sheet to the Office of the Superintendent of Bankruptcy (OSB). If there are inspectors, a copy of the minutes of the meeting — at which the inspectors approved or rejected the trustee's final SRD and dividend sheet must also be sent to the OSB.
The OSB reviews the documents and decides whether to request that the Court review the trustee's accounts.
If the OSB determines that a review is required, the trustee sends the following to each creditor:
- a notice of the hearing for the Court review;
- a copy of the trustee's final SRD; and
- a copy of the dividend sheet showing the dividends paid, or to be paid, to the creditors.
In this case, the trustee will give you any final dividends within two months after the date of the request for the review.
If a review by the Court is not required, the trustee will send a notice of his or her discharge to each creditor, as well as the trustee's final SRD and a copy of the dividend sheet. The trustee will also send the final dividend that is owed to the creditor either with the notice or within three months after the notice is sent.
In either case, a creditor may object to the review of the trustee's accounts and the discharge of the trustee by sending a notice of objection to the trustee. A copy of the notice of objection must also be filed with the Court (a $50 fee applies) and a copy sent to the OSB.
The trustee is deemed to be discharged after he or she has
- distributed to each creditor the final dividend owed;
- closed the bank account used to administer the proposal;
- sent a certificate of compliance and deemed discharge to the OSB; and
- forwarded to the OSB any unclaimed dividends and undistributed funds (see below).
If a trustee is unable to deliver a dividend (for example, if he or she is unable to locate the rightful creditor when the dividends are distributed), he or she is required to forward the unclaimed funds to the OSB. The money is then held in trust until the creditor comes forward to make a claim.
The unclaimed funds database is a listing of creditors who are owed dividends but who could not be located by the trustee. You can find out whether you have an unclaimed dividend owing to you by searching the database.top of page
Complaints and appeals
Filing a complaint
If you feel the proposal process was poorly managed or believe you have suffered a prejudice, please contact the Office of the Superintendent of Bankruptcy (OSB) at 1-877-376-9902 (toll free). The OSB keeps records of all complaints received and may investigate any complaint from a creditor or other person.
Appealing an act or decision
You may appeal (within the period specified by the Court) any act or decision of the trustee if you believe you have been wronged. The Court may confirm, reverse or modify the act or decision.