Amending Consumer Proposals

Amending a consumer proposal is a formal method of asking creditors to change the terms of a consumer proposal. This is usually done by the Trustee, when the person who has filed the proposal is no longer able to honour the terms of their proposal.

Because of the care we take to ensure that our clients’ consumer proposals are realistic, and the excellent tools we provide our clients to help them better manage their finances – the vast majority of our consumer proposal clients are able to make all of their proposal payments in full and on time.

However, despite their best intentions, some clients find themselves unable to fulfill the conditions of their consumer proposal. The causes for this vary, but they often include – reduced income, job loss, illness, divorce or other major life events.

It should be noted that normally, under the Bankruptcy and Insolvency Act (BIA), if three proposal payments are missed, a consumer proposal is automatically deemed annulled (cancelled).

Take Heart – There Are Solutions:

If they are having problems honouring the terms of their proposal, it is essential that clients let their Trustee know as soon as possible. That way, there may be time to find a solution.

If the inability to pay is a temporary situation:

• The Debtor may miss up to two payments without having to amend the existing proposal. The Debtor will need to make up these payments before the end of the proposal.
• If the amount unpaid is less than three months of payments – they can also increase the amount of future monthly payments, to make-up for the missed payments, without having to amend the proposal.

If the inability to pay is permanent:

• If the client’s new income is permanently less than when they filed their proposal, the Trustee can work with the Debtor to submit a consumer proposal amendment to their creditors, reducing the monthly payments.
• If the situation is such that an amendment has been, or will be rejected by the creditors – it may be time to discuss filing for bankruptcy with the Trustee.

What Happens if a Consumer Proposal is Annulled?

As mentioned above, normally once three months of payments are outstanding on a consumer proposal, the consumer proposal is automatically annulled.

If the proposal is annulled, the debtor and creditors are back where they started from and the creditors have the right to take legal action against the debtor. At this point, the debtor may need to discuss the possibility of filing a bankruptcy with their Trustee.

However, if the client’s situation turns around, the Trustee might be able to begin a process to reinstate the proposal. Note: if the proposal was filled before September 18, 2009 it can be more difficult to reinstate the proposal.

If you are having problems honouring the terms of your consumer proposal,
let your Trustee know as soon as possible.