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Consumer Proposal Rejections and RBC
Generally a consumer proposal is accepted by creditors because it makes good financial sense. If you can show that your creditors will receive substantially more through a proposal than they would if you filed for bankruptcy then your proposal should get approval. Though it will be over a longer time period the creditors will be able to recoup more of their losses so they tend to look upon consumer proposals favourably.
However one of the biggest banks in Canada does not seem to fall in line with this logic. Royal Bank of Canada (RBC) routinely rejects proposals that all other creditors accept. According to one Ontario Bankruptcy Trustee RBC reject more proposals that all other creditors combined. An argument could be made that since RBC is one of the biggest banks in Canada (and as such one of the most common creditors) their numbers would naturally be higher. However, even taking that into account, RBC still has an unusually high refusal rate. Simply put they have a higher requirement for percentage of debt to be paid before they agree to a proposal.
Why do they do this? The rationale behind what seems to be an internal policy is unclear. RBC outsources the processing of insolvency filings to a third party company. All communication from your Bankruptcy Trustee goes through this third party and they in turn relay messages to and from RBC. Since there is no direct contact between Trustees and RBC it is hard for them to understand the reasoning behind proposal rejections, especially since it results in many bankruptcies and RBC losing out on 1000s of dollars a year.
So what does this mean for you? Unfortunately if RBC is your major creditor it may mean you will end up having to pay more under a consumer proposal than you would with any other creditor. It may also mean that you will have to assign into bankruptcy if your original proposal was the maximum you could afford. Talk to your Trustee about the likelihood of your proposal being accepted and your options if it is not.
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