Financial circumstances take unexpected routes in everyone’s lives. A consumer proposal helps you settle your financial problems by paying off your debts if they are at most $25,000. Yes, a consumer proposal is a formal contract under the Bankruptcy and Insolvency Act to pay debts for less than you owe. Your payment terms depend on a review by your Licensed Insolvency Trustee of your financial position at the filing time, and your monthly payments are organized to suit your budget.
But what happens if your financial situation varies – for better or worse? What happens if you face an unforeseen windfall during your proposal, if your income rises, and what are your options if your income falls due to various reasons?
Does a change in your income affect your consumer proposal payment?
Once your consumer proposal is accepted, the monthly payment remains unchanged even if your income increases. So, that is good news. But is it the same when your income falls or your expenses vary? No, it is not. So, does this unfavorable change in your circumstances makes it challenging to keep up with your proposal payments?
If your income drops, you cannot continue the proposal as filed. Speak with your Licensed Insolvency Trustee about a possible amendment. Your trustee will then discuss the changes in your situation and help determine your best next step.
Reach out to Dana MacRae, Licensed Insolvency Trustee, with no second thoughts.
What is the impact if a consumer proposal is not met?
A consumer proposal is only accepted if you stay caught up on three monthly payments. A deemed annulment occurs three months after the settlement is due if your consumer proposal does not require monthly payments. Hence, if your consumer proposal is not met, your unsecured debts and collection calls will return to you. Moreover, you may be subject to future wage garnishment.
What are your possibilities if you have a material adverse fall in income?
It is possible to restore a rejected proposal if action is taken within 30 days of default. Still, it is always good to be proactive if your income falls and you doubt you will be unable to meet your proposal as initially filed. You can amend the proposal for a decreased monthly payment, or if your proposal is completed, you can file a revised consumer proposal for the amount already paid. So, if you have a material adverse drop in income, talk with your Licensed Insolvency Trustee before you start missing payments to find the best possible solution.
Call for a free, confidential consultation at 1-800-665-9965 – Dana MacRae, Licensed Insolvency Trustee.
Remember that the creditor decides to accept the amendment, although most would be willing to negotiate depending on your present financial situation. If the creditors are against the amended consumer proposal, it will not revert to the original terms; your proposal will fail, and your debts will become due in full again.
If your income increases or you have more assets, it affects the modification process. When you amend your consumer proposal, your Licensed Insolvency Trustee will have to analyze it to decide between a consumer proposal and bankruptcy. If you cannot amend the proposal, you can file bankruptcy or let the consumer proposal become annulled.
What happens if you face a windfall?
In a consumer proposal, you hold your assets and are free to use them. Also, any new assets you acquire once your consumer proposal is approved are yours. Hence, even if you win the lottery, receive an inheritance, or gain a bonus or appraisal at work, there is no difference to your proposal terms as long as that occurs after your proposal is approved. The same holds for any growth in the value of your assets. Your consumer proposal is court-approved 15 days after the creditors have accepted it. So, your unsecured creditors are not privileged to any of this new money once the court accepts your proposal.
What occurs if you get into debt again?
The majority of people want to re-establish their credit after filing a proposal. Obtaining and using a credit card enables you to re-establish your credit rating. Once your credit score boosts, you qualify for other credit, like a car loan. You must pay monthly balances to evade additional late payment notifications on your credit report and interest costs. Remember that new high-interest loans are hard to repay and could endanger your present proposal payments.
Taking on new debt while in a proposal makes it challenging to keep up with your required proposal payments. If you filed a proposal to save your assets, obtaining new debts also risks these assets. You cannot amend consumer proposals to include debts incurred after the date of the proposal. You cannot file a new consumer proposal on new debts while in an active proposal. If you cannot pay your monthly bills and consumer proposal payment due to new debts, you can file for bankruptcy, as it deals with all the proposal debts and the new debts.
Talk to your Licensed Insolvency Trustee
Take control of your finances rather than your finances controlling you! Be sure to talk to your proposal administrator as soon as you see signs of financial difficulties. So, if you are in the middle of a consumer proposal and struggling due to your changes in finances, speak with your Licensed Insolvency Trustee about your options. Reserve a free consultation with a Licensed Insolvency Trustee to discuss probable debt solutions that can assist you in becoming debt free.