Cancelling a Consumer Proposal: What You Need to Know

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Are you considering cancelling a consumer proposal? You may have changed your mind about pursuing debt relief through this method or want to explore other options. Whatever the reason, it’s essential to understand the implications of cancelling a consumer proposal before making any decisions. This article will delve into the details of withdrawing a consumer proposal.

Understanding Consumer Proposals

Before diving into the specifics of cancellation, let’s first define a consumer proposal. A consumer proposal is a legal agreement between you (the debtor) and your creditors that allows you to repay a portion of your debts over time. It’s a popular bankruptcy alternative, offering several benefits, such as:

  • Reduced monthly payments
  • Protection from creditor harassment
  • Interest charges frozen or reduced
  • Potential for a lower total payout than if you were to continue making minimum payments on your own

Reasons for Cancelling a Consumer Proposal

You may cancel a consumer proposal for various reasons. Here are some common ones:

Changing financial circumstances: Your income may have increased, allowing you to afford your debts without a proposal.

Better debt management alternatives: You may have found another solution to manage your debt more effectively, such as debt consolidation or a personal loan.

Personal preferences: You may change your mind about pursuing a consumer proposal.

Whatever your reasons, it’s crucial to carefully consider the potential consequences before taking any action.

How to Cancel a Consumer Proposal

To cancel a consumer proposal, you must follow these steps:

Step 1: Notify your trustee: Inform your trustee in writing of your decision to cancel the proposal. Be sure to send the letter via registered mail to confirm receipt.

Step 2: Obtain a court order: Your trustee will guide you through obtaining a court order to cancel the consumer proposal. This involves attending a hearing and providing evidence of your intention to cancel.

Step 3: Pay any outstanding fees: You may be responsible for paying any outstanding fees associated with the proposal, such as administration costs.

Once you’ve completed these steps, your consumer proposal will be officially cancelled, and its terms will no longer bind you. However, withdrawing a consumer proposal may impact your credit score and future borrowing ability.

Impact on Credit Score

Cancelling a consumer proposal can affect your credit score in two ways:

Late payments: Your credit score may suffer if you miss any payments during the proposal period.

Proposal status: The fact that you entered into a consumer proposal and then cancelled it may remain on your credit report for up to three years after the proposal was filed. This means that withdrawing a consumer proposal may impact your ability to secure credit in the short term. 

Alternatives to Cancelling a Consumer Proposal

If you’re considering cancelling a consumer proposal, exploring alternative solutions to managing your debt is essential. Some options you may want to consider include:

Debt Management Plan: A debt management plan (DMP) is a program where a credit counsellor helps you create a budget and negotiate with creditors to reduce interest rates and waive fees. With a DMP, you make one monthly payment to the credit counselling agency, which distributes the funds to your creditors.

Debt Consolidation Loan: A debt consolidation loan allows you to combine multiple debts into one loan with a lower interest rate and a single monthly payment. This can simplify your finances and potentially save you money on interest.

Bankruptcy: If none of the above options work for you, filing for bankruptcy may be a last resort. Bankruptcy provides a fresh start by wiping out most of your debts. Still, it also has significant long-term consequences, including a negative impact on your credit score and difficulty obtaining credit in the future.

It’s crucial to evaluate each option thoroughly and seek professional advice before making a decision. A licensed insolvency trustee can provide guidance on the best course of action for your unique situation.

Cancelling a consumer proposal can have both positive and negative effects on your financial situation. Before making any decisions, assessing your current financial standing is vital, as well as exploring alternative solutions and seeking expert advice. Remember that cancelling a consumer proposal may only sometimes solve some of your financial problems, so it’s essential to approach this decision thoughtfully and deliberately. By understanding the implications of cancelling a consumer proposal, you can make an informed choice that aligns with your financial goals and objectives.

Contact Dana MacRae – Licensed Insolvency Trustee, for free and expert consultation.

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