If your debt has become too much for you to handle then a consumer proposal can provide you with the debt relief you’ve been looking for. Most Licensed Insolvency Trustees will suggest that you look into filing a consumer proposal before you consider another more drastic option such as bankruptcy.
While filing a consumer proposal can provide you with the debt relief that you need, you’re still making a commitment to pay back a portion of the total debts you owe. This can sometimes lead to debtors being unable to keep up with their payments. When this happens, amending your consumer proposal may be your best option.
Yes, under the right circumstances, you can amend your consumer proposal. Amending a consumer proposal means asking your creditors to alter its conditions, which can occur if they deny the offer or you can’t fulfill your agreement in some way. You can apply for an amendment through your Licensed Insolvency Trustee (LIT), who will renegotiate a deal with the creditors on your behalf.
To qualify for an amendment to your consumer proposal, you usually need to offer your creditors a good deal or be experiencing a legitimate financial hardship, such as a loss of employment, divorce or another major life event that reduces your general income.
As mentioned, amending a consumer proposal means requesting a change in its terms. Creditors may also deny your proposal to make their own amendments. Here are some common amendments you can make to a consumer proposal under the right conditions:
A consumer proposal amendment is when you, as the debtor, ask your creditors to change the terms of your agreement because your financial situation has changed and you are no longer able to make your payments regularly.
As we mentioned before, by law you are allowed to miss two payments. If you’ve already missed these two payments and know that you will be unable to make the next payment, you should speak to your trustee about amending your proposal. You should also speak to your trustee about amending your proposal if you become unemployed or your income changes.
As we discussed above, consumer proposals are often referred to as alternatives to personal bankruptcy. It is essentially an arrangement that is negotiated between you and your creditors. It is mediated through a licensed insolvency trustee.
A consumer proposal is a legally binding contract that provides you with instant protection from debt collectors while arranging for partial repayment for the total of unsecured debts you owe. When you file a consumer proposal, your creditors agree to forgive your balance after you’ve paid the agreed-upon portion of the total debt you owe.
By law, you are allowed to miss or defer two payments without any consequences. However, if you exceed more than these two missed payments, automatically your proposal will fail. Legally, if you fall behind in your payments by the equivalent of three monthly payments, on the day of your third payment, the consumer proposal will be annulled. So remember, to avoid your consumer proposal from ever being automatically cancelled, never miss three payments.
Amending your consumer proposal means altering its conditions while annulling means cancelling it altogether. This is something the court may do if you fail the proposal terms. For instance, if you have 3 payments in arrears, your proposal will be automatically annulled. Those payments don’t have to be consecutive either (the rule is cumulative).
Your consumer proposal might also get annulled if:
Soon after you miss 3 payments, your consumer proposal will be “deemed annulled”. This is never a good thing, because it comes with some serious drawbacks, such as:
To figure out how to best deal with your financial issues, you should assess how long they are likely to last. The length of your financial troubles can greatly affect how you should deal with them and whether or not an amendment to your consumer proposal is a good option.
For example, losing your job would most likely be considered a permanent or at least a long-term issue. However, if you are only transitioning from one job to another, with a brief gap in your employment, this would be a temporary and surmountable financial issue.
If ever there is a significant change in your income levels, keep in mind that it is possible to amend your proposal. When you realize that your shift in income will affect your ability to make your payments, you should not hesitate to contact your insolvency trustee. Do this immediately. Don’t wait until you’ve missed any payments. The sooner your trustee knows of your issue, the sooner you will be able to reach a solution by meeting to review your options.
Depending on the severity of your financial troubles, here are your options:
If you’re currently dealing with any type of debt or financial issue, Loans Canada can help you find experienced and professional debt experts who can guide you through a wide variety of debt and credit programs.
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Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.
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