Changing a Consumer Proposal
I filed a Consumer Proposal, and now I’ve lost my job. What can I do if I can’t keep up the payments on my proposal?
A Consumer Proposal is a popular alternative to bankruptcy, which will let you combine payments on your unsecured debt into one manageable payment. However, sometimes your proposal payment can prove too much, perhaps following a change in circumstances, or something like losing your job. Even unforeseen events, such as the COVID-19 Pandemic have impacted people making payments on Consumer Proposals. In these circumstances you may want to change your Consumer Proposal.
We could reschedule two payments
Canadian law regarding Consumer Proposals allows you to miss or skip two monthly payments without the proposal defaulting. If you miss the equivalent to three monthly payments (or more), your proposal will automatically fail. Some proposals allow for payments less frequently than monthly (ie. Quarterly, or a lump sum), and the default provisions for those are calculated differently.
If your proposal defaults because you missed 3 or more monthly payments, then on the day that your third payment was due, your proposal is annulled (cancelled).
So what if I can’t afford the proposal anymore?
If a change in your financial situation affects your ability to make your scheduled proposal payments, contact your Trustee (also called an Administrator when you are in a proposal) who can help you amend the proposal. Note that you have to work with the Trustee who currently has your proposal to make the amendment.
If you foresee difficulty, contact your Administrator (Trustee). Don’t wait until you have missed payments if you know the change in your situation will be permanent. The Administrator can work with you to find a solution.
If you lost your job, and you feel this is a permanent change in your circumstances, consider amending your proposal. However, if you have only been laid off and expect to be recalled, your circumstances may be only temporary.
So how do I fix the Proposal so that it doesn’t default?
Your options are:
- Do Nothing. Leave the proposal as is and do your best to make sure you don’t miss any more payments. The Administrator will add any payments you missed to the end of the proposal.
- Change your proposal by Amending your Proposal, with the help of your Administrator. This change will require that your creditors approve the new proposal.
- Discuss filing bankruptcy with your Administrator
Due to the COVID-19 pandemic, there are certain provisions that have been adjusted to accommodate the situation, especially where Canada Revenue Agency (CRA) has been included in your proposal for a debt such as income tax. You can read CRA’s position on defaulting consumer proposals during the COVID-19 pandemic HERE. Contact your Administrator if COVID-19 has significantly impacted you, and may cause your proposal to default. They can explain these revised, and temporary rules, to provide the best outcome for you.
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