Consumer Proposal Rejected? What to Do Next in Canada (2026)

If your consumer proposal is rejected, you can amend and resubmit it. Rejection does not mean bankruptcy is inevitable. Under the Bankruptcy and Insolvency Act, you have 30 days after rejection to file an amended proposal with better terms. Most rejections happen because the offer was too low or CRA had outstanding issues—both are fixable. The overall acceptance rate for proposals filed through experienced Licensed Insolvency Trustees sits at 99.4%, and most of the 0.6% that fail initially get resolved through amendment.

How the Creditor Voting Process Works

The voting rules are straightforward under BIA Section 54(2).

• Simple majority by dollar value decides acceptance—creditors holding more than 50% of your total proven claims must vote yes
• Creditor count doesn’t matter—five small creditors voting no are overruled by one large creditor voting yes if that creditor holds the dollar majority
• 45-day deemed acceptance kicks in if no creditor requests a Meeting of Creditors within 45 calendar days of filing
• 25% threshold triggers a meeting—creditors holding at least 25% of your debt can force a Meeting of Creditors
• Proof of Claim required—only creditors who file formal claims with your LIT get to vote
• Silence equals yes—creditors who don’t respond within 45 days are counted as accepting under BIA Section 66.27

In practice, 83% of consumer proposals pass through deemed acceptance without any meeting. The creditors never respond. Their silence becomes automatic approval. The remaining 17% go to a Meeting of Creditors. Of those, most pass after minor amendments. Outright rejection accounts for less than 1% of all filings.

Your Licensed Insolvency Trustee pre-negotiates with your largest creditors before filing. This is why the acceptance rate is so high. By the time you sign your proposal, your LIT already knows the major creditors will vote yes. When that pre-negotiation breaks down or a creditor changes position—that’s when rejection happens.

Top Reasons Consumer Proposals Get Rejected

• Offer is too low — your proposal pays creditors less than they’d receive in bankruptcy, so they have no incentive to accept
• CRA is the majority creditor and you haven’t filed all tax returns or offered enough repayment on tax debt
• Single creditor holds the blocking vote — one creditor owns more than 50% of your debt and votes no
• History of fraud or asset concealment — creditors discover undisclosed assets or suspicious transactions before filing
• Unrealistic payment terms — your proposal promises payments your verified income can’t sustain

Unemployed applicants face additional scrutiny. If your income situation is the core issue, the consumer proposal while unemployed guide explains how LITs structure proposals around EI, severance, and assets instead of employment income.

The most common rejection trigger is a low offer. Creditors compare your proposal to what they’d receive in bankruptcy. If bankruptcy yields more, they vote no. Your LIT calculates this comparison before filing, but sometimes asset values change or creditors disagree with the trustee’s valuation.

CRA rejections follow a specific pattern. CRA expects all outstanding tax returns filed before they vote. They also want a minimum 25-40% repayment on tax debt. Skip either requirement and CRA votes no. If CRA holds more than 50% of your total debt, that single no vote kills the proposal.

What Happens at the 45-Day Creditor Meeting

When creditors request a Meeting of Creditors, your LIT schedules it within the 45-day window at their office. You attend. Your creditors attend in person or by proxy. The meeting follows a structured process.

Your LIT presents your financial situation—income, expenses, assets, and what creditors would receive in bankruptcy. Creditors ask questions. They challenge numbers they disagree with. Then they vote.

Three outcomes are possible at the meeting:

1. Proposal accepted as filed — creditors holding the dollar majority vote yes and your proposal passes immediately
2. Creditors request amendments — they want higher payments, a shorter term, or both, and you negotiate new terms on the spot
3. Proposal rejected outright — creditors vote no and refuse further negotiation

Most meetings end with option two. Creditors don’t reject proposals they can improve. They counter-offer. Your LIT advises you in real time whether the amended terms are affordable. If you accept the amendment, creditors revote immediately. The amended proposal typically passes the same day.

Marco from Brampton owed $58,400 total. CIBC held $31,200 in credit card debt—53% of his total claims. His LIT filed a proposal offering $275 monthly over 60 months ($16,500 total, 28% recovery). CIBC requested a Meeting of Creditors. At the meeting, CIBC wanted $340 monthly ($20,400 total, 35% recovery). Marco’s LIT confirmed he could afford $340 by adjusting his budget. Marco accepted. CIBC voted yes. Every other creditor followed. The proposal passed the same day as the meeting.

Worried about a creditor meeting? Find a Licensed Insolvency Trustee who pre-negotiates with your largest creditors before filing.

When CRA Is the Hold-Out Creditor

CRA is the toughest creditor to satisfy and the most common reason for rejection when tax debt is involved. CRA’s insolvency unit follows internal guidelines that set minimum thresholds.

• All tax returns must be filed for at least the past six years before CRA votes on any proposal
• Minimum 25-40% repayment on CRA debt—CRA won’t accept pennies on the dollar even if it exceeds bankruptcy recovery
• Future compliance commitment — you agree to file all returns on time and pay future taxes owing
• Realistic income disclosure — CRA cross-references your proposal income against T4s and Notices of Assessment

When CRA holds less than 50% of your total debt, their no vote doesn’t matter. Other creditors outvote them. The proposal passes.

When CRA holds the majority, your LIT negotiates directly with CRA’s insolvency unit before the meeting. This is a separate negotiation from the standard pre-filing process. Your LIT contacts CRA, confirms the minimum acceptable offer, and restructures your proposal to meet it. Most CRA rejections are resolved this way—before the meeting ever happens.

Fatima from Surrey owed $73,000 total. CRA held $41,500 in income tax and HST arrears—57% of her debt. Her first proposal offered 22% repayment. CRA rejected it. Her LIT called CRA’s insolvency unit directly. CRA confirmed they’d accept 32%. Fatima’s LIT restructured her proposal to $390 monthly over 60 months ($23,400 total, 32% of CRA’s claim). Fatima filed the amended proposal. CRA accepted within 30 days. Total delay from rejection to acceptance: 8 weeks.

The 30-Day Window After Rejection

Rejection starts a clock. Under BIA Section 57(a), you are deemed to have made an assignment into bankruptcy 30 days after your proposal is rejected—unless you file an amended proposal or take other action.

The stay of proceedings that protected you from collections during the proposal continues during this 30-day window. Creditors cannot garnish wages or freeze accounts while the clock runs. This gives you breathing room to decide your next move.

Most people use this window to file an amended proposal. Your LIT takes the feedback from the creditor meeting, adjusts the terms, and resubmits. The amended proposal triggers a new 45-day voting period. Creditors who rejected the original version see the improved offer and typically accept.

If you choose bankruptcy instead, filing voluntarily before the 30-day deadline gives you more control over the process. You work with your LIT to understand what happens during bankruptcy, what assets are exempt, and what your surplus income payments will be. A voluntary filing is cleaner than a deemed assignment.

Don’t let the 30-day clock run out without a plan. Talk to a Licensed Insolvency Trustee about your options—consultations are free and confidential.

How to Strengthen a Resubmitted Proposal

Your amended proposal needs to address the specific reasons creditors voted no. Generic increases don’t work. Targeted changes do.

Increase the total recovery percentage. If creditors wanted 35% and you offered 28%, your amended proposal needs to hit 35% or higher. Calculate the new monthly payment: divide the target total by 60 months. If that number fits your budget, proceed.

Extend the payment term to the maximum 60 months. Longer terms reduce monthly payments while maintaining the same total recovery for creditors. If your original proposal was 48 months, extending to 60 months drops your monthly obligation by 20% while keeping creditors’ total payout the same. Review the full cost breakdown to understand how term length affects your payments.

Add a lump-sum component. Offer a one-time payment from a tax refund, family gift, or asset sale on top of monthly payments. A $3,000 lump sum at month 12 sweetens the deal without changing your monthly budget.

Resolve CRA compliance issues. File all outstanding tax returns. Pay any small balances separately. Provide updated income documentation. CRA won’t vote yes with open compliance issues—period.

Get supporting documentation. Include recent pay stubs, bank statements, and a detailed monthly budget. Creditors reject proposals when they doubt your ability to pay. Proof removes that doubt.

Your LIT handles the filing process for the amended proposal. The amended version goes through the same timeline—45 days for creditor voting, 15-day court review, then binding acceptance.

Negotiating with the Dissenting Creditor Before the Meeting

Smart LITs don’t wait for the meeting to resolve objections. When a creditor requests a Meeting of Creditors, your LIT contacts them directly to negotiate.

This pre-meeting negotiation works because both sides want to avoid the meeting. Your LIT asks the dissenting creditor: what terms would you accept? The creditor gives a number. Your LIT brings that number to you. If you can afford it, the proposal is amended before the meeting. The creditor withdraws their meeting request. The proposal is deemed accepted.

Derek from Hamilton owed $44,800 across four creditors. TD held $24,600—55% of his total debt. TD requested a meeting. Derek’s LIT called TD’s insolvency department the next day. TD wanted $15,000 total recovery instead of $12,500. That meant increasing Derek’s monthly payment from $208 to $250 over 60 months. Derek agreed. His LIT filed the amendment. TD withdrew the meeting request. The proposal was deemed accepted on day 45 without anyone sitting in a room.

This approach saves six to eight weeks compared to waiting for a meeting, amending at the meeting, and going through another voting cycle. Your LIT’s relationship with major creditor insolvency departments makes this possible. Banks have dedicated teams that handle proposal negotiations daily.

When Rejection Leads to Bankruptcy

Sometimes amendment won’t work. The creditor’s demands exceed what you can afford. Your income dropped since filing. The gap between your offer and creditor expectations is too wide.

Bankruptcy is the backup under the BIA. It is not a failure—it’s the legally designed alternative when proposals don’t succeed. Compare the two options carefully using the full comparison guide.

In bankruptcy, your unsecured debts are discharged after 9 months (first-time, no surplus income) or 21 months (with surplus income). You lose non-exempt assets. You make surplus income payments if your household income exceeds the Office of the Superintendent of Bankruptcy threshold. Your credit report shows R9 for 6-7 years from discharge.

In a successful amended proposal, you keep all assets. You make fixed monthly payments for up to 60 months. Your credit report shows R7, removed 3 years after completion. No surplus income calculations apply. Use the consumer proposal calculator to see which option costs less in your situation.

The cost difference depends on your income, assets, and family size. For someone earning $5,200 monthly net with no dependants, surplus income in bankruptcy runs roughly $450 per month over 21 months—$9,450 total plus trustee fees of $1,800. A consumer proposal for the same person might cost $350 monthly over 60 months—$21,000 total but with asset protection and a better credit outcome.

For a broader view of all available paths, review the solutions comparison page.

Court Rejection vs Creditor Rejection

These are two different things. Creditor rejection happens at the vote—creditors holding the dollar majority vote no. Court rejection happens during the 15-day review period after creditors accept.

Court rejection is extremely rare. A court refuses a proposal only when:

• The proposal terms violate the BIA
• There is evidence of fraud or bad faith by the debtor
• The proposal is not in the best interest of creditors despite passing the vote

Creditor rejection is the scenario you’re more likely to face. The process described above—amendment, resubmission, negotiation—applies to creditor rejection. Court rejection has no amendment path. If a court refuses your proposal, it’s rejected permanently and the 30-day deemed assignment clock starts.

If a court is reviewing your proposal, your LIT represents you during the hearing. Courts almost always approve proposals that creditors accepted. The 15-day review is a formality in 99% of cases.

Real-World Rejection and Recovery

Raj from Edmonton — $62,000 in mixed debt

Raj owed $27,400 to CRA for unfiled business income from 2023-2024, $18,600 on a Scotiabank line of credit, and $16,000 across three credit cards. CRA held 44% of his debt. His LIT filed a proposal offering $248 monthly over 60 months—$14,880 total, 24% recovery.

CRA voted no. Raj hadn’t filed his 2025 tax return. CRA’s policy is non-negotiable on this point. Scotiabank and the credit card companies voted yes, but they only represented 56% of the debt. Normally that’s enough—except CRA formally requested a meeting, and at the meeting, CRA’s representative persuaded Scotiabank to change its vote pending a higher offer.

Raj’s LIT moved fast. Raj filed his 2025 return (he actually had a $1,400 refund, which CRA applied to his balance). His LIT restructured the proposal to $310 monthly over 60 months—$18,600 total, 30% recovery. CRA accepted. Scotiabank followed. The amended proposal passed 6 weeks after the initial rejection.

Sandra from Moncton — $39,500 single-creditor block

Sandra owed $39,500 total. Capital One held $22,800—58% of her claims. Her proposal offered $165 monthly over 60 months ($9,900 total, 25% recovery). Capital One voted no. They wanted 33% minimum.

Sandra couldn’t afford higher payments on her $2,900 monthly net income. Her LIT explored alternatives. Sandra’s mother offered a $4,000 lump-sum contribution at month six. The restructured proposal: $165 monthly for 60 months plus a $4,000 lump sum—$13,900 total, 35% recovery. Capital One accepted.

Without the lump sum, Sandra’s next option was bankruptcy. In bankruptcy, she had no assets to seize and minimal surplus income. Total bankruptcy cost: $2,400 over 9 months. But bankruptcy meant an R9 rating for 6-7 years versus R7 removed 3 years after completing her proposal. The lump sum made the proposal work and saved Sandra four years of credit damage.

---

Consumer proposal rejection feels devastating, but it’s a negotiation—not a dead end. The rejection rate is under 1% for a reason: LITs structure proposals to pass before they’re filed. When rejection does happen, the system gives you tools to fix it. You can amend and resubmit with better terms. You can negotiate directly with the dissenting creditor. You can address CRA compliance issues that triggered the no vote.

The 30-day window after rejection protects you from immediate bankruptcy while you regroup. The stay of proceedings keeps creditors from garnishing wages or freezing accounts. Your LIT guides you through every step—amendment drafting, creditor negotiation, and if necessary, bankruptcy preparation.

If your proposal was rejected or you’re worried about rejection, the fix starts with understanding why. Talk to your LIT. Get the specific reason. Build the amended offer around that reason. File it within the 30-day window. The system is designed for second chances.

Get a free, confidential assessment of your consumer proposal options. Find a Licensed Insolvency Trustee near you and book a consultation within 48 hours—no upfront costs, no obligation.