What if I Cannot Afford My Consumer Proposal Payments?

Consumer proposals are gaining popularity in Canada because:

• A person can keep all his assets; even those that may be lost in a bankruptcy;
• The monthly payments might be less than in a bankruptcy;
• A professional accreditation might be in jeopardy in a bankruptcy.

A consumer proposal must offer the creditors more than they would get in a bankruptcy. However, the amount of the payments and the length of time you make payments can be negotiated with the creditors.

What if I Cannot Afford My Consumer Proposal Payments?

Circumstances can change so sometimes a person finds he cannot afford the payments. You have options.

Renegotiate your Consumer Proposal.

Contact your trustee and explain your situation. Your trustee can communicate with the creditors and they may agree to an amended proposal. However, be aware that if the creditors reject the amended consumer proposal it will be cancelled. Your creditors will now be able to pursue you for payment.

Stop making payments on the Consumer Proposal.

If you miss three months of payments and do not file an Amendment to your Proposal, your Proposal will no longer be a legally binding agreement. This means that your creditors will be free to take legal action against you for the full amount of the debt you owe them.

File Bankruptcy

You can convert your consumer proposal to a bankruptcy. Since you cannot afford your consumer proposal a bankruptcy may be more attractive now.

When to File Bankruptcy

You should now consider when you are going to file bankruptcy. Many people file for bankruptcy immediately. However, you can wait until your consumer proposal is in default (after three months of missed payments). This pause, with you making no payments, may help you stabilize your financial situation. Your consumer proposal administrator will help you make an affordable proposal but things do happen and financial problems can creep up again. Debtors that make a lump sum payment proposal won’t have this issue, but some debtors in a proposal can find themselves struggling to pay their required payments under their proposal. If you are struggling to make your proposal payments there are options but you must act quickly. If you miss the equivalent of 3 payments your proposal will be deemed cancelled, and you won’t be debt free as the debt won’t be discharged. Additionally, you will have lost all of the monies already paid into the proposal, as they won’t be returned to you. When you file a consumer proposal to get protection from your creditors it is supposed to help your situation, not make it worse, so if you are struggling with the payments it is important you speak with your administrator as soon as you realize you are starting to struggle. It is possible to seek out other debt relief options if you are struggling with maintaining your proposal as agreed.