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Aug 19, 2022|Consumer Proposals

What Happens if I Can’t Make My Consumer Proposal Payments?

Our Experts Explain the Ins and Outs of Consumer Proposal Payments

Are you struggling to repay your debts? Creditors can take drastic measures to collect the money you owe, such as freezing your bank account, starting wage garnishments, and seizing assets. Don’t let it come to this! By filing a consumer proposal, you can significantly decrease what you owe, halt all collection actions against you, and convert your overwhelming debts into one, easy-to-manage monthly payment—all without giving up your assets.

This might make you wonder what happens if you fall behind on your consumer proposal payments. In this case, is personal bankruptcy the better choice? The team at J. Bottom & Associates Ltd. has the answers to your questions. With more than 55 years of combined experience, our financial trustees are equipped to provide simple, accurate, and actionable solutions to help you overcome your financial struggles. Call us today to get your fresh start.

The woman working on a laptop about the ins and outs of consumer proposal payments in British ColumbiaHow are Consumer Proposal Payments Negotiated?

Only a Licensed Insolvency Trustee who is endorsed, regulated, and authorized by the federal government can prepare and negotiate the terms of a consumer proposal. The settlement amount your trustee presents to your creditors depends on several factors, including:

  • Your ability to repay: Your income, expenses, and family size affect your repayment terms more than anything else.
  • Your total debt: The more sizable your debt, the more likely your creditors will accept a settlement below 50 percent of what you owe.
  • Bankruptcy comparison: Your Licensed Insolvency Trustee will calculate how much creditors can expect to receive if you file for bankruptcy instead of making a consumer proposal. The settlement offer must be higher than this amount to appease your creditors.

Depending on how these factors play out, you can expect to eliminate 50 to 70 percent of your debt with a consumer proposal. For instance, if you have $20,000 in credit card debt and payday loans, your Licensed Insolvency Trustee may negotiate a settlement of $8,000, reducing what you owe by 60 percent. Perhaps your creditors agree to a 42-month repayment period, resulting in payments of $190 per month. Remember, once your consumer proposal goes through, your creditors stop charging interest and penalties, allowing you to repay your debt interest-free.

Consumer Proposal Payment Options

Your Licensed Insolvency Trustee carefully crafts a repayment plan to suit your financial situation. The most common approach is to pay a fixed, predictable monthly payment spread out over three to five years. However, other options are also available, including:

  • Making a lump sum payment to pay off the proposal immediately
  • Arranging for smaller payments at the beginning and larger payments toward the end if you anticipate a higher income later in the repayment period
  • Paying off the proposal early with no penalty
What Happens If I Can’t Afford My Consumer Proposal Payments?

If your financial circumstances unexpectedly change for the worse, you may suddenly find yourself unable to make your consumer proposal payments as originally agreed. Work with your Licensed Insolvency Trustee to prevent annulling your proposal.

Amend the Repayment Terms

If the original settlement no longer works, you can ask to adjust your payments to reflect the changes in your financial situation. Your Licensed Insolvency Trustee will approach your creditors with a new deal and provide a reasonable explanation for requesting the adjustment.

Rest assured that there are no additional fees to amend a proposal. However, there is a risk—if your creditors refuse the new offer, your proposal will be cancelled. Fortunately, if your payments are current when you request the amendment, you can have the proposal automatically reinstated. Of course, if the original proposal wasn’t working for you, reinstating it might not make sense.

Defer Up to Two Payments

You are allowed to defer payments for two months. However, if you miss three payments, the proposal is deemed annulled. This means your debts return, and your creditors can take legal action against you. If you have deferred two payments and think you might miss the third, contact your Licensed Insolvency Trustee immediately to amend the payment terms.

Convert the Consumer Proposal into a Personal Bankruptcy

If your income has decreased dramatically and it’s no longer feasible to make proposal payments, it may be time to consider bankruptcy consolidation. You have the right to file at any time, whether you are current with your payments or have fallen behind. Your Licensed Insolvency Trustee can help you get the timing right for your situation.

Regain Control of Your Finances with Help from Our Financial Experts

J. Bottom & Associates Ltd. is a Licensed Insolvency Trustee with offices in New Westminster, North Vancouver, and Port Coquitlam. We can help you navigate your complex financial situation and outstanding debts, answering any questions you have along the way. For help filing or amending a consumer proposal, please contact us today.

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