A consumer proposal is a popular debt management solution, but what happens if you stop paying a consumer proposal? Let’s delve into the consequences and explore the possible solutions.
The Fundamentals of a Consumer Proposal
A consumer proposal is a formal, legally binding process conducted by a Licensed Insolvency Trustee (LIT).
It’s an agreement between you and your creditors to pay back a percentage of what you owe in debt.
LIT submits the consumer proposal to the Office of the Superintendent of Bankruptcy
(OSB).
Once approved, you cease direct payments to unsecured creditors.
Legal actions, including wage garnishments, are halted.
The Acceptance or Rejection of a Consumer Proposal
Your creditors have 45 days to accept or reject the proposal. A meeting may be conducted during this period. For the proposal to be accepted, a simple majority of the creditors must vote in favor. If no creditor refuses or calls for a meeting within the 45 days, the proposal is automatically considered accepted.
If your proposal is accepted, you maintain possession of your assets and must make payments to your LIT. However, if the proposal is rejected, you’ll need to modify and resubmit it or consider other options.
Meeting the Conditions of a Consumer Proposal
A consumer proposal is based on you meeting certain conditions, typically including monthly payments to your LIT. Failing to meet these conditions leads to the annulment of your proposal. Consequently, your creditors can take legal action to recover the money you owe.
What Happens If You Stop Paying a Consumer Proposal?
If your financial situation changes making it impossible to keep up with payments, you should contact your LIT immediately. Ideally, do this before missing a payment. Here are your options:
- Keep the proposal as is and strive to avoid missing further payments.
- Amend the proposal to change the monthly payment amount. This requires creditor approval.
- Deliberately miss a payment to annul the proposal. Consult your LIT before doing this as it can sometimes be advantageous.
- File for personal bankruptcy.
Seeking Professional Help
The most crucial step to take if you cannot meet the conditions of your consumer proposal is to seek help immediately. This will allow you to review your options and work with a professional who will guide you to the best decision.
Should You File a Consumer Proposal?
If you believe a consumer proposal might be beneficial for you, it’s crucial to consult a professional. They can guide you through everything from credit counselling to bankruptcy, helping you choose the best path.
In Conclusion
Consumer proposals offer a lifeline to those struggling with debt. However, the journey doesn’t end with the acceptance of your proposal. It’s pivotal to meet all conditions, including making regular payments. If you find yourself unable to do so, reach out to your LIT immediately to explore your options.
Remember: “What happens if you stop paying a consumer proposal?” is a question better asked before you miss a payment. Proactive communication with your LIT can save you a lot of stress and potential legal issues.
