When talking with clients, I often get asked, “Do I have to meet with my creditors?”; coupled with a look of stress or fear.
Let me explain the basics and then provide you with some practical, real life scenarios.
The Bankruptcy and Insolvency Act tells us that the Administrator of the proposal (that’s your trustee) is to call a meeting of creditors if:
- directed to do so by the Official Receiver (the government) or
- if creditors with a value of 25% of the total debts request a meeting.
It’s extremely rare for the government to direct the trustee to call a meeting. In fact, I have never experienced this in the five years I’ve worked with Hoyes, Michalos.
Why might a creditor call a meeting? Interestingly, the only way a creditor can ensure having their voice heard if they don’t like the deal, is to request a meeting. If a creditor votes against a proposal, or asks for more money, the vote is only ‘counted’ if they or another creditor requests a meeting.
Let’s look at an example. For simplicity, let’s say we have three creditors. Bank A is owed 20% of the debt, Bank B is owed 35% and Bank C is owed 45%.
- In our first scenario, Bank A doesn’t like the deal, they vote against and request a meeting. But, Bank B and C accept the deal and don’t ask for a meeting. The result is no meeting is required because Bank A only holds 20% of the vote value which is less than the 25% required to call a meeting. Also the proposal is accepted as is.
- If Bank B doesn’t like the deal, votes against the proposal, and requests a meeting, a meeting will be called because they have enough votes (more than 25%) to call a meeting. But, if A and C both vote in favour at or before the meeting, the proposal will pass anyway (because they represent more than 50% of the value of the debts).
- What if A and B both dislike the offer but neither of them calls for a meeting? Well, in that case, no meeting is called and the proposal passes, because basically, no one asked for a meeting for the votes to be counted.
Settle Your Debt
Talk to a consumer proposal administrator about your options.
The Meeting of Creditors
It is actually fairly rare that anyone even attends the meetings for a Consumer Proposal.
Here’s why: IF a meeting of creditors is called, the law requires that it be booked within 21 days of the end of the voting period – which is almost always more than enough time to negotiate a deal that can be approved.
Here is an example again.
- Using the numbers above, let’s say A and B (55% of the debt) both ask for more money than what was offered, and request a meeting. If the person who offered the proposal can pay the additional amount, or if a ‘middle ground’ can be reached, then no one has to attend. The new deal can be set up with a single piece of paper, signed and sent into the trustee’s office.
So, the answer to the question is there could be a meeting, but they are seldom actually held because if we can work out the deal before the meeting, the only person at the meeting will be your trustee.