Reviving a Dead Consumer Proposal
In the world of finance, a consumer proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). This method is often seen as an alternative to personal bankruptcy. However, sometimes, due to unforeseen circumstances, a consumer proposal might fail. This article aims to guide individuals on how to revive a consumer proposal that has died.
The Tale of a Consumer Proposal
To better understand the process of reviving a consumer proposal, let’s walk through a hypothetical scenario of a man named John (name changed to maintain confidentiality), who was struggling with multiple debts, the largest being his tax debt to the Canada Revenue Agency (CRA).
John’s financial situation was dire and his bank accounts were frozen by the CRA. Even his monthly pay cheque was being partially garnished by the CRA. As a result, he was feeling overwhelmed and sought professional help.
Analyzing a Consumer’s Financial Situation
John’s financial advisor reviewed his financial situation, including his debts, income, and assets. After assessing all the options, they decided to proceed with a consumer proposal since personal bankruptcy was not a feasible option for John.
This involved signing legal paperwork, attending a meeting with the LIT to understand the terms of the consumer proposal, and then filing the documents with the court. This process put John under protection, stopped his wage garnishment, and unfroze his bank accounts. Creditors were notified and given 45 days to vote on the proposal’s terms.
Challenges Faced During a Consumer Proposal
Despite the initial success of his consumer proposal, John ran into additional financial difficulties due to a family member’s illness and a temporary job loss. This led to a series of missed consumer proposal payments, which resulted in the annulment of his consumer proposal. The protection from his creditors ended and the CRA threatened to garnish his wages again, putting John in a state of panic.
Reviving a Consumer Proposal: The Path to Redemption
Fortunately for John, there was a ray of hope. He could revive his consumer proposal with the assistance of an insolvency lawyer. This involved petitioning the bankruptcy court to restore his consumer proposal. If John had been able to find the money the Trustee had requested before the date of his court hearing scheduled, the Trustee could have applied to the court for an order restoring the Consumer Proposal.
However, any creditor can file a notice of objection to this process and prevent the consumer proposal from being brought back to life if they believed John might miss his payments again.
The Role of an Insolvency Lawyer in Reviving a Consumer Proposal
John’s insolvency lawyer was successful in reviving his consumer proposal with the court. John caught up on his missed payments, and the Administrator reviewed the court order and allowed the revival to occur. It’s important to note that when a consumer proposal is revived, it cannot include any new debt that was incurred after the original date of filing. Only the original debts can be included.
What Happens If a Consumer Proposal Cannot Be Revived?
If, for any reason, John couldn’t have revived his consumer proposal, his alternative could have been the filing of a personal bankruptcy. In a bankruptcy estate, he could have added any new debt he had incurred since the date of the original consumer proposal filing.
Understanding the Official Stance on Reviving a Consumer Proposal
The Office of the Superintendent of Bankruptcy (OSB) has clarified certain issues related to the revival of a consumer proposal. They stated that a consumer proposal can be revived without first curing the monetary default that led to the annulment. Once the consumer proposal is revived, payments should resume according to the terms of the proposal unless it has been altered by the court or amended as per the Bankruptcy and Insolvency Act (BIA).
Conclusion
Reviving a consumer proposal that has died is not a simple task. It requires the guidance of a professional and understanding the legal procedures involved. However, it is not impossible. As seen in John’s case, with the right help and determination, a consumer proposal can be brought back to life, helping the debtor regain financial stability.
Remember, financial struggles are not the end of the road; there are always options available to help you regain control over your financial life. If you find yourself in a similar situation like John, don’t hesitate to seek professional advice and explore the option of reviving your consumer proposal.
