When you file a consumer proposal you make an offer to your creditors to pay a certain amount over time in exchange for which they agree to wipe out your debts. As part of the process each creditor receives information about your income, expenses, debts, assets and any recent asset transactions. They review this information and make a decision on whether to accept or reject your proposal. Before they make a decision, a creditor may want to talk to the trustee, talk to you and occasionally talk to the other creditors. A mechanism to do this is to request a meeting of creditors. Here is two case studies on how this discussion actually worked in the favour of the debtor.
Case Study One
Creditors sometimes feel that they have additional information that the other creditors should take into account. In addition to making sure the administrator has this information, they are allowed to make sure the other creditors get it as well.
A short time ago I helped a young couple with their financial problems. Let’s call them George and Erica (not their real names). They had suffered some personal tragedy and as a result had some unexpected medical expenses and both had to take time off work which was a big contributor to their debt problems. Their creditors included 2 local credit unions. Credit Union A agreed to support the consumer proposal but Credit Union B (who was owed the most money) asked for a creditors’ meeting but were opposed to the proposal. Because they were owed more than 50% of the total debt this could have resulted in the proposal being rejected.
At meeting of creditors, Credit Union A explained to Credit Union B why they were supporting the proposal. They were privy to some information about how the couple had attempted to keep up with their payments during their medical problems and how the cost was continuing to affect them financially. This was enough for Credit Union B to change their vote and the end result was that the consumer proposal was accepted as filed.
Case Study Two
David (not his real name) owed money to a few banks and numerous individual creditors. One of the individual creditors, Julie (not her real name) felt that she had more information to share about the consumer proposal. Julie sent letters to all of David’s creditors explaining why she was voting against the consumer proposal and why they should as well. As a result, several of the creditors called our office asking for more information about David’s financial affairs. As administrators of the consumer proposal, we investigate the financial affairs of the debtor. The essence of Julie’s concern was that she felt David was able to afford to pay more based on her knowledge of his financial situation. At the meeting of creditors the creditors asked David to increase his payment and David agreed. Again, the end result was that the proposal was approved, but amended based on information provided by one creditor.
It is important to know that as the Administrator of a Consumer Proposal, the trustee must take a neutral stand an any matter. When a proposal is filed, the trustee sends along a report advising why the consumer proposal is reasonable and fair, but they are not allowed to suggest to the creditors that they accept it (in fact it’s against the rules for us to do so).
As you can see, your creditors may want to talk to each other before deciding how they are going to vote and they are allowed to do so. In most instances, if you have been honest and up front about all issues you may find it helps you.