Most Canadians who file a consumer proposal will complete the process and become debt-free. However, a consumer proposal is deemed annulled if you don’t make payments on time.
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.
If you owe three months in arrears, the consumer proposal is automatically annulled 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 requiring urgent action.
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
A consumer proposal can be automatically revived within 30 days of it being annulled. Your proposal administrator 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 your financial situation, why you didn’t pay, and the steps you will take to complete your consumer proposal. 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
If you cannot revive your consumer proposal, you may file for bankruptcy to settle the debts included in the consumer proposal, plus any new debts.
Negotiate with your creditors
Because your consumer proposal has been annulled, protection from your creditors will stop, and these creditors can resume debt collection procedures against you.
In this scenario, you may decide to turn to debt settlement to negotiate with your creditors in order to avoid actions such as wage garnishments and legal action.
Consumer proposal annulment is serious
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 the terms of the proposal revived.
There are also other options, such as negotiating with your creditors or filing for personal bankruptcy instead.
Get debt relief
Free consultation with a Licensed Insolvency Trustee by video, phone or in person.
- Experienced trustees
- Local offices
- Personalized plan
- No fees
It only takes 30 seconds.
Share this article