The vast majority of Canadians who file a consumer proposal will complete the process and become debt-free. However, if you don’t make payments on time, a consumer proposal is annulled (cancelled).
When is a consumer proposal annulled?
A consumer proposal is a legally binding agreement between you and your creditors, filed through a Licensed Insolvency Trustee. If you stop making your monthly payments, it can result in the deemed annulment of your proposal.
Owing three months in arrears will result in the automatic annulment of your consumer proposal as detailed in the Bankruptcy and Insolvency Act.
On rare occasions, a consumer proposal may also be annulled by court order if you fail to file your income taxes.
What happens if a consumer proposal is annulled
If your consumer proposal is annulled, the following happens:
- All of your debts are reinstated.
- Creditors are informed, and they have 60 days to oppose the revival of the annulment.
- Protection from your creditors stops.
- Creditors will resume debt collection procedures.
This is a serious situation and requires urgent action to resolve.
How to resolve a consumer proposal annulment
There are several ways to resolve a consumer proposal annulment.
Ask your trustee to revive your consumer proposal
You can revive a consumer proposal within 30 days of it being annulled. Your Licensed Insolvency Trustee will request that you settle the overdue payments, so you are not in default.
If you bring the arrears up to date and the trustee agrees that the proposal can continue, it will be revived.
Your trustee must send a notice to your creditors and the Office of the Superintendent of Bankruptcy (OSB) to inform them that the consumer proposal will be revived 60 days after the date of annulment.
If a creditor opposes the revival, the consumer proposal will remain annulled.
Apply to the court to revive your consumer proposal
If you don’t settle the overdue payments within 30 days, you can ask your trustee to apply to the court to have your consumer proposal revived.
You’ll be asked to explain why you didn’t pay the proposal and the steps you will take to complete it. Your creditors and the Office of the Superintendent of Bankruptcy will also be notified.
If the court refuses, the consumer proposal remains annulled.
Apply to the court to file a new consumer proposal
You cannot file another consumer proposal for the same debts without permission from the court. Therefore, you must apply to the court to file a new consumer proposal, but this requires a lawyer.
File for bankruptcy to resolve an annulled consumer proposal
Bankruptcy has many advantages but always treat bankruptcy as a last resort.
Negotiate with your creditors
In this scenario, you may decide to attempt to negotiate with your creditors to avoid actions such as wage garnishments and legal action.
See also: Debt help in Canada
If your consumer proposal is annulled, you must speak to your Licensed Insolvency Trustee immediately, who will be able to advise you on the best course of action for your circumstances.
A consumer proposal can be revived within 30 days of it being annulled. If you can’t settle the overdue payments within this time, you can ask your trustee to apply to the court to have your consumer proposal revived.
There are also other options, such as negotiating with your creditors or filing for bankruptcy instead.
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