October 10, 2024
A consumer proposal can help many become debt-free, but what if your situation changes during one? We are looking at cancelling a consumer proposal here.
Deciding to file a consumer proposal is challenging and requires careful consideration. Many people who are overwhelmed by debt consider taking this step to manage their financial situation in a structured way. If you’ve filed a consumer proposal, it means you’ve already gone through a lot of stress and careful consideration to reach that point.
The consumer proposal is created based on your financial situation at the time of filing. But what if you change your mind? Or if your situation changes? Is it possible to cancel a consumer proposal? And if so, what are the consequences of this?
Let’s start with a brief overview of what a consumer proposal is.
A consumer proposal allows you to reduce the amount you owe while paying off the remainder over a period of up to five years. A consumer proposal allows you to keep all your assets.
A Licensed Insolvency Trustee (LIT) is the only professional authorized to administer a consumer proposal. The LIT will work with you to review your financial situation, develop the proposal, and present it to your creditors. They act as a mediator between you and your creditors to help reach an agreement that works for everyone.
A consumer proposal is a legally binding agreement. This means that as long as you keep up with the agreed-upon payments, your creditors cannot take further legal action against you, such as wage garnishments or lawsuits.
Yes, you can withdraw a consumer proposal, but you have a very limited amount of time to do so. After filing your proposal, you have a 60-day window to change your mind and withdraw it.
During this period, you can reconsider your decision and choose to cancel the proposal if you feel it's not the right solution for you.
To withdraw the proposal within this 60-day window, you must inform your Licensed Insolvency Trustee in writing. The LIT then notifies your creditors and the court, officially cancelling the proposal.
It's important to understand that this is a brief opportunity. You cannot withdraw the proposal once the 60 days have passed. Passed that point, the proposal is considered legally binding, and you are required to make the payments you agreed to as part of it.
If you’re considering filing a proposal, it’s very important to be sure of your decision before fully committing. Ask your Licensed Insolvency Trustee as many questions as you need to fully understand what a proposal will mean for your situation.
Yes, but this is not something you want to have happen.
The court can annul a consumer proposal if you miss payments for three months. There are serious consequences to having your consumer proposal annulled by the court.
These include:
An annulled consumer proposal will stay on your credit report for six years.
But the damage doesn’t stop there, Credit ratings are done on a 1–9 scale. R1 is the best, and R9 is the worst. When you file a consumer proposal, your credit rating automatically drops to R7. Having your proposal annulled will drop it again, this time to R9, the lowest possible.
Sometimes a person’s circumstances change during a consumer proposal. Job loss, divorce, or health issues can all result in a loss of income or higher expenses. If this happens to you, there are things you can do.
It is possible to amend the terms of your proposal if your situation changes. It’s important that you don’t wait until you miss payments to reach out to your Licensed Insolvency Trustee’s office. The sooner they are aware of the change, the sooner they can help you find a solution.
If the change in your circumstances is considered long-term or permanent, such as a lost job, divorce, or health issue, then your LIT can work with you to amend the terms of your proposal. This will involve getting your creditors approval for the changes, but it can be done.
If you have chosen to file a consumer proposal but your situation has drastically changed and amending your proposal will not be good enough, then filing for bankruptcy becomes an option.
In this circumstance, filing for bankruptcy will replace your consumer proposal. There can be some advantages to this.
A consumer proposal lasts for up to five years, whereas a first bankruptcy can be completed in nine to 21 months. Bankruptcy also offers you the same legal protections from your creditors as a consumer proposal.
Again, if your situation changes, you should reach out to your Licensed Insolvency Trustee and their team right away. They’ll be able to help you look into all your options so you can decide what is best for you.
A consumer proposal can help you reduce your debt while keeping your assets, but it’s essential to thoroughly assess your financial situation before proceeding. This is where a Licensed Insolvency Trustee can help determine if a proposal is right for you.
A Licensed Insolvency Trustee can review your finances, explain all available debt relief options, and guide you toward the best solution for your unique circumstances. Whether it’s a consumer proposal or another form of debt relief, our Trustees provide the expertise and support needed to help you make an informed choice and start your journey toward financial stability.
October 10, 2024
A consumer proposal can help many become debt-free, but what if your situation changes during one? We are looking at cancelling a consumer proposal here.
