What Happens if You Default on a Consumer Proposal?
Why You Shouldn’t Default On Your Consumer Proposal
Debt can have severely damaging ramifications for anybody.
Whether it is credit card, overdraft, or loan debt, you must find a solution to consolidate your debt.
A popular way to do this is to agree on a Consumer Proposal.
However, while many debtors will elect to follow this path, there is still the chance of defaulting.
Today, we will discuss what happens if you default on a customer proposal and also explain your options should this occur.
What is a Consumer Proposal?
A Consumer Proposal is a legal process that will help you find relief from your debt.
It is governed by the Bankruptcy and Insolvency Act, and when working alongside a Licensed Insolvency Trustee (LIT), you can reduce your debt liability by as much as 75%.
This gives you freedom from debt and allows you to start rebuilding your financial health through an agreement with an LIT.
Throughout the proposal, you will pay back an agreed fee each month to help you minimize your debt.
What Are Your Options If You Default?
After accepting your Consumer Proposal, you are legally required to accept all of the terms outlined in the agreement.
This means you must make the payments on time, whether this is every week or month.
As long as you continue to make these payments, creditors cannot seek further action against you.
However, if you fail to make these payments, you are considered to have defaulted on a Consumer Proposal.
The agreement will outline that three missed payments will lead to the contract being annulled, but this can also work in conjunction with failing to meet other demands of the proposal.
If you miss one payment or two payments and do not believe you will be able to make the third in time before annulling the contract, you can amend your Consumer Proposal.
This involves asking your creditors to adjust the existing agreement to help you meet your debt repayments.
You must request these amendments prior to missing the third payment or breaking the terms of the agreement.
If you fail to do so, then the Consumer Proposal will be deemed null and void.
However, this does not free you from your existing debt, and the failure to adequately repay your loans or pay off debts within the terms of the agreement could affect your credit score.
Furthermore, after the contract is annulled, creditors are within their right to seek legal action for retrieving the debts that you owe.
Who Can Help?
It is never recommended to accept defaulting on your Consumer Proposal.
Despite this, we understand that all situations are different and that your financial situation could change during the contract.
To prevent defaulting on your proposal with consistent payments, Bankruptcy Canada can help.
Do you need assistance for filling out an evaluation form for debt relief services before defaulting on a consumer proposal?
Do you just want to get more information regarding your options when experiencing debt?
Contact one of our licensed trustees for a Free Debt Relief Evaluation on 877-879-4770 to schedule your free evaluation today.