So You Got a CP Notice

So You Got a CP Notice

So, You’ve Received a Consumer Proposal

As a Canadian collection agency, we have come across plenty of consumer proposals in 35 years of operation. You may have dealt with this in your business too. However, many businesses never have and fewer still are aware of their rights. This entry into our blog aims to shed light on those rights.

What exactly is a consumer proposal?

The short answer is a consumer proposal is the last opportunity that your customer has to avoid bankruptcy. The way your customer may do this is by filing with a licensed insolvency trustee and meeting certain conditions:

  • Owing debt not totaling more than $250,000 (excluding their mortgage)
  • Have a stable occupation
  • Not have any other open consumer proposals

This process allows your customer to settle their debts by paying back their creditors some of what they are owed.

How does it work?

It works like this; your customer first contacts the trustee to initiate the process. From this point on all payments, they may be making, interest accruing on the debt, and any legal action (including garnishing of wages and lawsuits) are ended. The trustee then gets paid by your customer once a month which is kept in a holding account. Once the amount of the proposal has been met the trustee will contact you and the other creditors. When you receive notice from the trustee of the consumer proposal it is critical to respond to it within 45 days of it being sent.

What happens in the next 45 days?

Once you’ve received the consumer proposal you may elect to accept or reject it. If all creditors agree to the proposal you will receive a portion of the amount owed to you and all your customers’ debt are considered settled. It is possible that if you rejected it or did not respond to the proposal it still may be approved by the other creditors. However, if you are owed 25% or more of the total debt owing you may call for a creditors meeting.

Creditors who are owed 25% of a consumers’ debt may call for a creditor meeting before accepting a consumer proposal.  When you do this, you have 21 days to hold the meeting to which all creditors may attend. At this meeting all creditors receive votes base on the amount that they are owed, a simple majority (50%+1) determines the vote. For example, if your customer owes $250,000 it only takes a vote of $125,001 to accept or reject the proposal. If at that meeting the vote is rejected the consumer may file a new proposal or file for bankruptcy.

It’s important to know what rights you as a creditor have if you receive a consumer proposal. You only have 45 days to respond to it so time is critical. Whether you decide accept or reject you should never discard a consumer proposal notice.

So, that raises the question. Did you respond to that notice?