Consumer proposals are becoming an increasingly popular alternative to bankruptcy in Canada. While there are many benefits to filing a consumer proposal there are two that stand out most:
- You can keep assets that you might lose if you were to file for bankruptcy,
- Your monthly payments may be less than they would be in a bankruptcy if you have high surplus income.
Your consumer proposal payments are negotiated with your creditors as part of your proposal and are primarily based on:
- how much your creditors can receive in a bankruptcy in total; and
- how much you can afford to pay monthly.
But what happens if circumstances change and all of a sudden you can’t afford your consumer proposal payments as you originally agreed?
Amending Consumer Proposal Payments
First and foremost, if you are having problems making your consumer proposal payments you should speak to your Consumer Proposal Administrator as soon as possible.
The good news is that a consumer proposal can be amended. If the deal you originally made with your creditors isn’t working then you have the right to ask your creditors to change the deal. There are no additional fees to amend a proposal and if your situation has changed then changing the proposal may make sense.
There is a risk to amending your consumer proposal payments however. If you ask your creditors to accept a new deal and they say no, then your proposal will be cancelled. If your payments are current at the time you ask for the amendment you can have it automatically re-instated. Of course, if the original proposal wasn’t working for you then it may not make much sense to have it re-instated. If you do not think you can continue you can consider your second option.
Converting From A Consumer Proposal To Bankruptcy
The second option is to consider whether or not you should be filing for bankruptcy. I know that one of the reasons people file consumer proposals is to avoid filing for bankruptcy, but there are times, particularly if your situation has changed and you can no longer afford your proposal payments, that filing for bankruptcy makes sense.
If you decide that filing for bankruptcy is the correct answer, then the next question to consider is, “when should you file for bankruptcy?” You have the right to file at any time so some people do so immediately. However you may want to delay filing until you have defaulted on your proposal. A consumer proposal is in default when you fall three months behind in your payments. That may give you a couple of months with no payments towards either the consumer proposal or bankruptcy. The savings may stabilize your situation.
You will however need to ask yourself why you are unable to maintain your consumer proposal as filed. If it is because your income dropped then filing bankruptcy, or an amended proposal, may solve your situation. If however it is because you are continuing to spend more than you earn, you need to address the underlying issue. Talk to your trustee about your credit counselling sessions. If you have not yet completed them, ask if you can attend sooner rather than later. They really can help you learn to budget and manage your money better.
So, if you can’t afford your payments in a consumer proposal contact your Trustee or Proposal Administrator and ask them if you should try and change the terms of your proposal or perhaps you should file for bankruptcy.
I’ve developed some bad Debts, going back 20 years or so! Most I don’t even remember! From bad cell phone accounts, to canadian tire accounts, and I’d like to pay back as much as I can back to them, If they will let me!
As a result of creditors getting into it throughout the years, I’ve not been able to pay them all back, like I would if I could!
My question is; how can I find out which ones still exist, and which ones are still affecting my credit!
I would like to pay them all off in a consolidated manner, through a Consummer Proposal Except my banks visa card, that one I’ll just pay off directly! Can You help me!
The closest thing to a public record of your debts is your credit report (it isn’t perfect because it only lists the debts you owe to its member companies, but it is the best we’ve got). So contact either Equifax or Trans Union, the two largest credit reporting agencies in Canada, and ask for a copy of your report. If something isn’t listed there then it has likely been written off. While you are at it, you might want to read up on the “Limitations Act of Ontario” – it sets out the rules whereby old debts can no longer be collected – it may be you don’t have to worry about some of the older items anyway.
What can one do when you don’t make enough money to pay your debts or claim bankruptcy. I am on a small disability pension and have problems making ends meet as it is. Two years ago my soon to be ex husband of 20 yrs cheated on me. He filed for bankruptcy and left half the debt to me, he makes over 70,000 a year while i make less that 9,000. As far as I know he has paid off his bankruptcy while I am still on the hook for the other half.
HI Barbara. The short answer is that you could do nothing. Your creditors cannot garnishee your disability pension at source. Alternatively, you could talk to a trustee about filing a bankruptcy or consumer proposal to officially eliminate the debts.
I am currently in a consumer proposal since December of last year. Recently I ran into financial difficulties which caused me to miss 2 payments. Also, I made the mistake of taking out 2 payday loans during this time, can I amend the proposal to include 2 additional creditors? As I am currently not working, I am unable to payback on the payday loans. I have a steady income on EI for only the next 16 weeks hoping to find employment soon. What are my options?
Hi Rodney: you should discuss these questions with your consumer proposal administrator. Only they are familiar with your file, and the creditors involved, so it is impossible for me to give you a specific answer.
In simple terms, no, you cannot add new creditors that did not exist when you filed your proposal. If you are not working, your options are to attempt to amend the proposal again, or default on the proposal and file bankruptcy now, while your income is low, or when you return to work, which may or may not be a good idea depending on your income at that time.
If i have just defaulted on my consumer proposal.Should i file for bankruptcy right away or wait until i have all my mortgage payments,utilitys,and property taxes up to date.
Hi John. That’s a question you should ask your trustee. If you are behind on mortgage payments and other living expenses it would be wise to get caught up on those payments before filing bankruptcy, but the decision will also depend on whether or not your creditors will commence legal action that may require you to seek the protection of bankruptcy as soon as possible. You should also consider whether or not you can afford to keep the house; if not, it is generally better to sell it or surrender it prior to bankruptcy, so that the resulting shortfall can be included in your bankruptcy.
Hi I have recently had a consumer proposal be closed due to some issues i had paying, i would like to re-instate it and i was told this is possible, my situation is much better now but i have creditors on me again. Is it possible to re-instate and what are the steps to get this done.
thank you in advance
It is possible to re-instate an annulled proposal, but only within 30 days of annulment. The other options would be to get a court order to re-instate the proposal, or perhaps file a proposal under Division 1. You should start by discussing this with your consumer proposal administrator to determine what options exist in your case.
I am about to go on disability CPP, but i am in a consumer proposal. Can i collect disability during a proposal?
Hi Ashley. Yes, you can collect disability while in a consumer proposal.
If you default on your proposal what happens to all the money you have already paid towards it?
what would happen if I only paid half my monthly payment on my Div 2 consumer proposal this month? But caught up next month?
Hi Victoria. As long as you are not behind on any payments, if you only make a half payment this month on your consumer proposal and caught up next month, you should be fine. The rule is that you cannot fall three months behind in your payments, so half a month should not be a problem.
What happens if I default on a consumer proposal and also decide not to go bankrupt. Can creditors still get access to my funds?
Hi Michael. While you are in a consumer proposal your creditors cannot take action against you. If you default in the proposal, the creditors regain the right to pursue you (phone calls, collection letters, legal action), which is why in many cases if you default on a proposal a bankruptcy is the next logical option. Your licensed insolvency trustee can provide you with further information.
We had filed a joint CP unfortunately my husband made a payday loan during CP and now its on the collection agency. Can we pay the loan in full directly to the collection agency without having any problem from other creditors that were included in our CP. need help pls
Yes, if you have debts that arose after you filed your consumer proposal, you can pay those debts. It goes without saying that it is strongly recommended that you do not use payday loans, either during or after your consumer proposal.
I have a house i wont to put in a bankrupt because i cant afford the up keep and and can aforad the moragae . I know i cant get a loan and my wife and family cant help and iam under a consumer prospal my home doesnt have egualty in the house i owe 28000 left on the house and maybe get 10k t 15k for the house so iam in upside down morage need help
If you are currently in a consumer proposal, I suggest you talk to your consumer proposal administrator (trustee). If you want to walk away from the house, your administrator can advise you on your options, which may include filing a bankruptcy and surrendering the house, but that’s an option you need to discuss in detail with a licensed insolvency trustee.
when do my payments start after filling a consumer proposal,my trustee says they start wright away even before the proposal has bein voted on by my crediters,is this correct
Payments normally do start before your proposal has been accepted by your creditors (day 46) or approved by the Court (day 60). Some trustees require a payment on the day you file (as there is a cost to file), others, like our firm require the first payment within 30 days of filing. When your payments will start should be explained to you before you file your proposal…
Hi there, I was going through a consumer proposal about 3 years ago and defaulted over year ago because I could no longer make payments, reason being that I was not making enough money between me and my spouse who is currently on social assistance, we were literally living pay cheque to pay cheque and at times could not keep up to the standards of daily living. Still owing a significant amount of money approximately $15000.00 from $32000.00, I managed to pay over half so far while I was in a consumer proposal and since the default, I have not heard anything from creditors or courts, no one has contacted me with regards to my debt and is reflecting every month on my credit report… please help, I need advice on what to do in my situation! Thank you.
You have a couple of options, you may apply to the Court to have your consumer proposal revived if you think you will be able to complete the payments now, or you may file for bankruptcy at any time which will deal with your proposal debts plus any new debts you may have, or you can keep doing what you are doing, and wait and see if your old creditors come calling… I suggest you contcat the trustee that was administering your proposal and go and discuss your options with them.
Hi there again, I am taking your advice about applying to the courts to have my proposal possibly revived, but how do I go about doing so, can I get a trustee to help me with this? and if not, how do I apply myself? I rather have a trustee work with me when I am dealing with the courts. Thank you.
Your best bet is to hire a lawyer to assist you, not a trustee. The Courts don’t always approve of trustees “acting like lawyers” – trustees are certyinaly qualified to complete this sort of task, but it is not what we’re licenced to do…
I am about to start the last year of my proposal. I have paid 60k of 78k total. I have struggled with this amount but have managed to make my payments of 650 bi-weekly but have fallen 2 months behind. I recently retired and my income is now roughly half of what I was making at the beginning of my proposal. I am about to ask my administrator to amend this proposal but I was told I have to be up to date with payments before I can apply for an amendment. I have struggled as my trustee has changed and the new trustee Lives in different city . I’ve been dealing with this for months and finally got the administrator to give me a meeting with a different trustee( my third) in my city. My questions are : do I have to be up to date with payments to amend my proposal? Are creditors likely to come after me if I do default at this stage of the proposal? If I do default, how much time do I have to apply to have my proposal reinstated? I apologize for the long email and thank you I’m advance for your response. Kind regards,
Hi Curtis. There is no legal requirement to be up to date with your payments when you file an amendment to a consumer proposal. However, if the amendment is rejected, your proposal is automatically annulled, so you should only file an amendment if there is no other way for you to make your proposal payments. Now that your income is lower because you are retired, the other option would be to stop making the proposal payments. Yes, the creditors would pursue you, but if you are retired you have no wages to garnishee, so that may be a risk worth taking. However, if you have other assets that may not be a good idea. You could also file bankruptcy to eliminate the debts, which would be much less expensive process now that you are retired. I would suggest you talk to your proposal administrator to get their thoughts, and perhaps since they appear to have trouble keeping staff, you could talk to another trustee (in your city) to get their advice on filing bankruptcy (since you can file a bankruptcy with a different trustee).
The law does not require you to be current with your payments to file an amendment – that is simply the policy of the trustee firm you are dealing with. Unfortunately, there is no mechanism to change trustees – your creditors can cause a trustee to be replaced, but you cannot. In regards to the amendment, you might want to ask that the proposal be amended to accept the payments you have made to date as complete settlement of the proposal – it depends on how much you have coming in now relative to the government guidelines about income.
Of course, first you have to get your trustee to agree to allow you to make an amendment… Good luck.
Can I get a consumer while unemployed but on EI? I make enough money to make the monthly payments proposed to me for a consumer proposal. I just don’t want to be rejected because I’m not currently employed.
There is no legal required to be employed in order to file a consumer proposal – what your trustee will want to do is make sure that you have sufficient income every month to make the required payments and that the proposal makes more sense than filing an assignment in bankruptcy. At the end of the day it your decision to make, but your trustee should be counselling you towards the solution that makes the most sense.
Hi. I’m currently in a consumer proposal. Payments are less than what bankruptcy would be. But I have decided I want to switch it to bankruptcy as it would only be 21 months as opposed to 5 years. I know i can put more money into the proposal each month than what is required but even if I did that, the soonest it would be paid would be in 3 years. 21 months, under 2 years seems like a better option. Question I have is can I switch even though the consumer payments are less and 2nd, what happens to the the payments I’ve already made?
Hi Michelle. Yes, you can file bankruptcy while in a consumer proposal, which annuls the consumer proposal. Whatever payments in the proposal you have already made will be distributed to your creditors, and the bankruptcy then starts. I would suggest you contact a licensed insolvency trustee to confirm the best estimate of what you will be paying in a bankruptcy to ensure that you are making the correct decision. Also, a consumer proposal is purged from your Equifax credit report six years after you start, while the bankruptcy remains for a minimum of six years from when you are discharged, so completing your existing proposal will remove the note from your credit report much sooner.
I am currently waiting for my consumer proposal to either be accepted or rejected, in this time, can I take out a payday loan or will that affect whether it is approved or not?
If you take out any new debts (payday loans included) after you file your proposal then those debts will be specifically excluded from the proposal – ie you’ll have to pay them back. If you need to take a payday loan out even after filing a proposal then perhaps the proposal wasn’t the right solution for your financial problems. You might want to give your trustee a call to discuss what is happening… Just sayin’ the reason to file a proposal is to sort out your financial problems. If you are already borrowing after filing the proposal then something is wrong.
I filed a consumer proposal in July of 2019, and I submitted 14,000 worth of debt to the bankruptcy company. I did not submit anything except for companies I believe I owed, plus a credit report.
The debt the trustee accepted from me was mainly word of mouth of me saying what I believed I owed.
My consumer proposal was annulled for non payment in January of 2020.
As of right now, I have only one account in collections, which stands at me owing just over $3000.
All the debt I included in my consumer proposal never went to collections, nor is it even on my credit report with TransUnion or Equifax. So I don’t even know why I actually owed, or if what I submitted was accurate.
The majority of them were payday loans.
At this time, having an annulled consumer proposal is what’s hitting me the hardest.
What are my best options here.
Do I try to revive my consumer proposal through the courts even though it’s been annulled for 5-6 months?
Do I file for bankruptcy?
Can I go to court to try and have this consumer proposal completely taken off my credit report, if I advise the court that I submitted a lot of inaccurate debt?
Hi Kelly. All of the options you mention are possibilities, with pros and cons to each. I would suggest you talk to a licensed insolvency trustee (either the one you used for your proposal, or a different one) and ask them to walk you through the options. You could also talk to a bankruptcy lawyer, but that would be expensive. Whomever you talk to you, you will want to provide them with your proposal documents, and your most recent credit report so they have full information.
I filed a consumer proposal because I was going to be receiving an Icbc settlement a few months down the road so I made my payments then when I got my settlement I paid the proposal in full I also paid other personal debts and my childrens tuition and student loans off a month later I was contacted and told I had to pay my creditors 100% of what I owed even though I was told this was not the case in a proposal! Now I have no money left over the trustee is being a bully giving me choices of an amended proposal (I have no income currently) or annul my proposal and fend for myself or if I file bankruptcy they will go after my children for the money and will give any new trustee all of my information about my situation I feel stuck I budgeted to pay all my bills put a new roof of my dads home and pay off my kids bills I had no idea this was going to happen to me
First, did you disclose the potential ICBC settlement when you filed your proposal – did it appear on your Statement of Affairs? Assuming that it did, was your proposal accepted by your creditors (the majority voted FOR) and then approved (or deemed approved) by the Court? Finally, did your proposal include a term that said if you came into some sort of windfall you were required to repay your debts in full?
I am asking because the answers to these question will impact what you may or may not have to do now. If the settlement was disclosed then one can accuse you of hiding that fact when you filed the proposal. If it was not disclosed then a creditor could make the argument you misrepresented your situation and then the creditor could apply to the Court to ask for extra money.
If your proposal was approved buy the Court and you paid it of in full then I am not sure how/why your trustee can ask for any extra money – unless your proposal had a clause stating that you’d repay the debt in full if you came into extra money (like from a settlement).
I suggest you either contact the Office of the Superintendent of Bankruptcy in order to have a government official explain all of the terms of your proposal to you, or you speak to a lawyer experienced in insolvency matters to see if the trustee has a right to demand the extra money.
It will all come down to what was disclosed on your proposal documents when you filed and the actual terms of your proposal as approved by the Court.
I entered a consumer proposal while employed but have been laid off 7 months now and am finding it difficult to make my payments and am behind at least 10 payments. What happens at this point. I currently have a car loan which is paid up to date as well and need my car. What are my options. Can I get payments lowered? Or suspended until I find work again? I’m terrified, stressed out and have incurred more debt. Also, I was in a car accident over a year ago (other driver deemed 100% responsible) and may receive a settlement. What happens with that money if I receive any?
Hi Marie. You should immediately contact the trustee who is administering your consumer proposal and discuss your options. Once you get three months behind your proposal will be annulled, so you should immediately contact your trustee to discuss your options.
Hello. I have a consumer proposal which i am pzaying 450$ bi weekly. I recently moved onto a nursing home at 40$ per day and cannot afford both. My income consists of cpp rif lif and oas for a total of 21000$ . Should I go bankrupt or just stop paying as I understznsd that I may be (creditor proof) As I have no assets and my pension income is untouchable.
Thanks you so much
PS I have no problem having creditors call me ss I am bored senseless in this PCH.
Call your trustee and have this discussion – you’ve asked quite legitimate questions and you do have a couple of options how to proceed…
I went into Bankruptcy March 2017 I had also been bankrupt before twice one for $10,000 and another for $22,000 the latter being 1997. In my day of raising children we had only a family allowance of $27.00 and no help with Day Care and I never received a dime in Child Support fast track 20 years I have a successful job children are grown and on their own I became very ill and had to go on Disability I had paid into insurance for years on credit card and loans but when it got time to pay they said they would not pay as I had a previous condition being depressed because one father committed suicide and depression because you have been bed bound for 6 months is two different things but I could not take on the big Banks with their big Lawyers I pay $400 a months in surplus and have 12 months left many times I have not been able to pay the Trustee would not allow me to go into Mediation and I was told if I miss another payment he is firing me and all my creditors can come back on me well I had a leak this month had to pay my deductible so my payment will not go through this month so I assume that he will go through with his threat my question is and sorry this is so long how can I talk to a Judge how can I prove that my money has been going to unforeseen circumstances I am 62 single disabled on CPPD and my MPP for a total of $3300 a month and I just cant communicate with my Trustee he is strict and has probably heard it all Thank you in advance for any information you can give me
Contact the Office of the Superintendent of Bankruptcy and tell them your story. They will let you know what your options are for dealing with your trustee. Mediation cannot be refused – if you have surplus income then you have a right to request it…
Hi there, I am 4 months away from completing my consumer proposal. My taxes were included in this. During this consumer proposal my owed taxes built up again. Can I take out a new consumer proposal once current one is done which includes owed taxes during current consumer proposal?
Yes, you can, but be aware that CRA may require a higher rate of repayment in the second proposal. The government is ok with people filing consumer proposals to deal with their tax debts, but they don’t like it when you do it a second time…