The Consumer Proposal and Deemed Annulment

Dealing with financial struggles can be a daunting task. One of the ways to manage debts and regain financial stability in Canada is through a consumer proposal. However, a unique aspect of this process is the chance of a deemed annulment. This article delves into the intricacies of the consumer proposal and deemed annulment, offering a comprehensive guide on the subject.

Understanding Consumer Proposals

A consumer proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). It comprises a plan that allows the debtor to pay back a part of the debts, thus providing relief from the pressure of debt repayment.

The Process

The LIT assesses your financial situation and determines the amount you can afford to repay. This proposal is then presented to your creditors, who can either accept, reject or counter the offer. Once approved, you’re required to make the agreed-upon payments to the LIT over a specified period.

Deemed Annulment: An Overview

If the debtor is unable to make three consecutive monthly payments, or if the total amount of missed payments adds up to three months’ worth, a deemed annulment of the consumer proposal occurs. This means the protection you had from your creditors is lost, and they can resume their collection efforts.

Consequences

The deemed annulment permits your creditors to resume contacting you and collecting your debts, inclusive of the retroactive interest that had ceased at the filing of your proposal. This situation needs quick attention, and understanding the options available to you is crucial.

Options Post Deemed Annulment

When your consumer proposal is deemed annulled, you have several options to restore your financial stability.

Reviving Your Proposal

Your LIT can revive your proposal if you can demonstrate that you can remedy your default within 30 days of the annulment. They may require you to repay the missed amounts fully. However, the decision rests with the LIT, and the revival of your consumer proposal is not guaranteed.

Applying to Court

If your 30-day period expires before you can address the arrears, you can present a motion to the court to have your proposal revived. Your chances of success are higher if you can explain the reasons for your default and assure the court of your capability to complete the proposal without further delay.

Filing for Bankruptcy

If revival through LIT or court is not possible, filing for bankruptcy can be an option. However, this should be considered after a thorough analysis of your situation and consultation with your LIT.

Filing a New Proposal

If you’ve accumulated new debt or need additional time, you can apply to the court to file a new consumer proposal. However, this process is complex and generally requires the assistance of a lawyer.

Negotiating with Creditors

You can always negotiate with your creditors, but this is a riskier option as you have no protection against possible judgments and garnishments from their claims. Remember, an agreement with one creditor does not shield you from others.

Conclusion

Understanding the consumer proposal and deemed annulment process is fundamental to managing your debts effectively. If your consumer proposal is annulled, consult a Licensed Insolvency Trustee immediately to understand your options and decide the next steps.

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