What If I Can’t Afford My Consumer Proposal Payments?

What to do if You Are Struggling to Make Your Consumer Proposal Payments

Consumer proposals are increasingly being favored as a viable substitute for bankruptcy in Canada. They offer two main advantages:

 

  • Retention of assets which could be lost in bankruptcy.
  • Potentially lower monthly payments especially if you have high surplus income.

 

Your consumer proposal payments are the result of a negotiation process with your creditors. These primarily depend on:

 

  • The total amount your creditors would receive in a bankruptcy.
  • Your monthly affordability.

 

But what if a change in circumstances renders you unable to meet your agreed consumer proposal payments?

Modifying Consumer Proposal Payments

If you are struggling with your consumer proposal payments, it is crucial to communicate with your Consumer Proposal Administrator without delay.

Fortunately, modifications can be made to a consumer proposal. If the initial agreement with your creditors is not feasible anymore, you can request a change. There are no extra charges for modifying a proposal, and it could be a sensible move if your circumstances have changed.

However, modifying your consumer proposal payments does come with a risk. If your creditors refuse the new proposal, the original one will be cancelled. If your payments are up to date at the time of the amendment request, the proposal can be automatically reinstated. But, if the original proposal was unmanageable, reinstating it might not be the best solution. If you think you won’t be able to continue, it might be worth considering the second option.

Switching From A Consumer Proposal To Bankruptcy

The second option is to evaluate if bankruptcy filing is the right step for you. Although the primary reason for choosing a consumer proposal is to avoid bankruptcy, there are instances when declaring bankruptcy becomes the more sensible option, particularly if you can’t afford your proposal payments due to a change in circumstances.

If you decide that bankruptcy is the right course of action, the next question is, “when should you file for bankruptcy?” You have the right to file at any time, and some people do so immediately. However, you might consider delaying the filing until you have defaulted on your proposal. A consumer proposal is considered defaulted when you are three months behind on your payments. This period could give you a few months of no payments towards either the consumer proposal or bankruptcy, potentially stabilizing your financial situation.

However, it is important to figure out why you are unable to keep up with your consumer proposal payments. If it is due to a decrease in income, filing for bankruptcy or amending the proposal might rectify your situation. But, if it’s because you are consistently overspending, it is crucial to address the underlying issue. Talk to your trustee about your credit counseling sessions. If you haven’t completed them yet, consider attending them sooner. These sessions can assist you in learning better budgeting and money management skills.

In conclusion, if you find yourself unable to meet your consumer proposal payments, get in touch with your Trustee or Proposal Administrator to discuss whether you should try to modify the terms of the proposal or consider filing for bankruptcy.

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