What Happens If I Default On My Consumer Proposal?

Defaulting On My Consumer Proposal: What Are The Consequences?

The outcome of defaulting on a consumer proposal can be daunting.

When it comes to financial management, understanding the consequences of defaulting on a consumer proposal is essential. But first, let us delve into the concept of a consumer proposal.

What is a Consumer Proposal?

A consumer proposal is a legal agreement set up by a licensed insolvency trustee between you and your creditors. It outlines a plan to pay back a portion of your unsecured debts over a specific period.

Defaulting on a Consumer Proposal

When you fail to meet the agreed-upon terms of your consumer proposal, you are in default. The repercussions of this can be severe, leading to what is known as a “deemed annulment.”

The Concept of Deemed Annulment

Deemed annulment is a legal term that refers to the cancellation of a consumer proposal due to non-compliance with the agreement.

If you’ve missed three consecutive monthly payments, your consumer proposal may be subject to deemed annulment. However, certain proposals contain provisions that might prevent annulment under specific circumstances.

Creditors and Collection Action

Once a deemed annulment occurs, your consumer proposal is no longer valid. This allows your creditors to restart their collection efforts, metaphorically “letting them out of the box.”

Bankruptcy: A Possible Outcome

If you’re unable to satisfy your creditors’ demands after defaulting on your consumer proposal, you may have to consider filing for bankruptcy. However, it’s crucial to seek professional advice before making such a decision.

Other Options

Bankruptcy isn’t the only solution. Depending on your financial situation, you might have other options available. It’s always best to explore all possible alternatives before deciding.

Impact on Credit Report

The entry of your defaulted consumer proposal generally stays on your credit report for six years following the deemed annulment. It’s essential to understand this to prevent long-term effects on your credit rating.

The Role of Credit Bureaus

Your creditors will likely report your missed payments to the credit bureaus once your consumer proposal is annulled. If you can manage to regain control of your financial situation, it can help minimize the impact on your credit score.


Defaulting on a consumer proposal can have serious implications. It’s crucial to understand the potential consequences and take steps to prevent them. Remember, financial management is a journey, and it’s never too late to make a change.

Contact a financial advisor today to discuss your options and navigate the complexities of consumer proposals and bankruptcy.

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