What happens if you miss a consumer proposal payment?

What are your responsibilities in a consumer proposal?

A consumer proposal is one of the most flexible debt relief options in Canada. It has fewer responsibilities than bankruptcy, but there are still a few important rules. If you file a consumer proposal, you’ll need to:

• Make regular payments (weekly, bi-weekly, or monthly).
• Attend two financial counselling sessions.
• Follow any additional conditions included in your filing.

As long as you meet these obligations, you could be debt-free within five years (or less), and your consumer proposal will be removed from your credit score three years after your completion or six years after your filing day, whichever comes first.

What happens if your income changes?

We understand that life happens and your income may change during your proposal. If your income increases, you’re at an advantage. Consumer proposal payments are fixed after creditor and court approval, so any additional income is yours.

If your income decreases, your payments won’t automatically adjust, and you’ll need to determine if you can still afford them. If you’ve experienced a significant financial hardship—like job loss, divorce, or illness—you may be able to amend your proposal. This requires going back to the bargaining table with your creditors, but they’re not guaranteed to accept the new offer. If your creditors don’t accept, your proposal is considered failed and collection rights return to your creditors.

In any case, it’s important to talk to your file administrator. They can help you decide what to do after an income change. If your proposal payments become unmanageable, you can consider filing bankruptcy instead. In bankruptcy, payments change with your income, which allows you to keep up even if you experience a drop in earnings.

What happens if you miss a proposal payment?

Life has ups and downs, so flexibility is built into a consumer proposal. However, if you miss a cumulative three months-worth of payments (six bi-weekly payments) your proposal is considered delinquent and could be annulled.

Can a consumer proposal be revived?

A consumer proposal can only be revived if you reach out to your file administrator within one month of being notified that your proposal is delinquent. We can’t revive a proposal without your consent. You would also have to catch up fully on your outstanding payments before your trustee can revive your proposal.

It’s best to avoid missing any payments, so we encourage you to reach out to your file administrator if you’re struggling with your payments.

What happens when a consumer proposal is annulled?

Annulment happens when you fall behind by a cumulative three months of payments, and your proposal isn’t revived or you fail to attend your required counselling sessions. Unfortunately, this has many negative consequences:

• Money paid into your proposal is nonrefundable, so you don’t get funds back.
• You’ll return to owing your initial amount, not the lower settled total arranged in your proposal.
• Your debt will begin collecting interest again.
• Creditor rights will be revived and collection actions—like creditor calls, wage garnishments, and liens—will be reinstated.
• Your credit score will continue to reflect poorly if payments to creditors are not made

How to avoid a consumer proposal annulment

The biggest key to avoiding a proposal annulment is to keep up with your payments. For some, this is easier said than done, but there are practical ways to stay on top of it.

• Ensure the payment date you pick aligns with your budget. Small actions like lining your payment up with your paydays can make sure you never miss a payment by accident. If you have a job change that changes your income and budget structure, reach out to your Trustee to assist with moving the payment.
• Make extra payments when possible. If you come into additional money from a bonus or tax refund, you can make additional payments. This can help you complete your proposal early or give you some breathing room in case you have a change in your financial situation.
• Stick to a budget. Include your consumer proposal payments in your monthly budget and cut down other expenses as much as possible.
• Talk to your file administrator. If you’re worried about fulfilling your proposal, the first thing you should do is contact your file administrator. They can help you navigate your options and recommend the best path forward for your unique situation.

My consumer proposal was annulled, what can I do now?

If your consumer proposal is annulled, you have three options:

1. Revive your consumer proposal. You may be able to revive your proposal, but there is a limited amount of time to do so. It’s important to reach out to your Trustee right away.
2. Return to paying your debts normally. You’ll owe the original amount, your debts will collect interest, and you may have to deal with collection actions.
3. File for bankruptcy. For many individuals facing financial hardship, bankruptcy can be the better option. Payments are based on your income and reasonable living expenses, which can make payments more affordable. However, it’s important to understand how your assets can affect bankruptcy payments. It’s best to speak with your Trustee on how this works.

If you want to file with a team that is ready to listen and support you through the duration of your filing, Doane Grant Thornton is the right choice. Our debt solutions professionals are here to help. Book a free consultation to get started.