Can You Adjust a Consumer Proposal
Posted on: March 18, 2025Posted in Consumer Proposals | Comments Off on Can You Adjust a Consumer Proposal
Under certain circumstances, yes, it is possible to adjust a consumer proposal to accommodate changes in your financial situation. This can be done through your Licensed Insolvency Trustee (LIT). Your LIT will file the request for amendment and present a new deal with your creditors. They must agree to the terms requested for the change to be final. Once your creditors accept the offer, it takes effect immediately and you can start making payments according to the new terms.
Although a consumer proposal is a formal, legal agreement in which you agree to abide by the terms and pay a portion of your debts to creditors over a specified period, it may be necessary to adjust or modify it if your financial circumstances change and the original payment plan becomes unmanageable. In some cases, particularly when your income exceeds the prescribed threshold for your family size, this can also trigger a requirement to modify the proposal to increase your payments and pay off the debt sooner.
What are some ways you can amend your consumer proposal?
Amending a consumer proposal involves restructuring your payment schedule to ensure you can keep up with your payments and help you avoid a default.
It is important you make your monthly payments on time. The Bankruptcy and Insolvency Act only allows two missed payments during your proposal. Defaulting on your proposal happens once you miss a third payment, even if the missed payments are not consecutive.
If you’re having trouble making payments under the current terms of your consumer proposal and are at risk of defaulting, you should contact your trustee as soon as possible to discuss potential amendments.
There are three common changes that can be made:
Adjust the amount you have to pay
If you’ve had unexpected financial challenges after filing the proposal, such as a job loss, health issues, or reduced work hours, and you’re having difficulty meeting the current payment schedule, you can request to lower the amount you have to pay. This amendment would be based on your new income level and would need to be approved by your creditors.
Similarly, if your income increases significantly during the proposal, it may need to be adjusted to reflect a higher amount so you can pay more toward your debts as well as ensure that you offer a fair repayment plan to your creditors. Your trustee may reassess the original terms and then propose that you increase your payments and a shorter repayment term to reflect your improved financial situation.
Adjust the time you have to complete the proposal
Another change you can make is extending the time to complete your payments. If you’re struggling to meet the monthly payments of the original repayment timeline but can still make payments over a longer period, you can request an extension of the repayment period. Extending the length of the proposal will help lower the monthly amount you will need to pay and make payments more manageable. Any extension must be within five years (or 60 months), which is the maximum period given by The Bankruptcy and Insolvency Act to complete a consumer proposal.
Adjust both the payment amount and timeline
Both the payment amount and timeline in a consumer proposal can be adjusted, provided the changes are approved by your creditors. If you’re facing challenges in meeting the terms of your proposal, but want to avoid bankruptcy and are committed to paying off your debts under adjusted terms, your trustee may be able to negotiate with creditors to propose a lower monthly payment amount within the 5-year period.
Conditions for Amendment
To successfully amend your consumer proposal, you must be able to demonstrate the following circumstances:
- You’re experiencing severe financial hardship
- The hardship is permanent or likely to remain long-term
- Offer the most fair and reasonable terms you can manage
- Get approval from the majority of your unsecured creditors
Creditors have the right to approve or reject any amendments, and they may be more likely to accept the amendment if it offers a realistic chance of repayment. It is crucial therefore to offer the most fair and reasonable terms you can manage so creditors can see that it is in their best interest for you to continue with your consumer proposal, even if it needs to be amended. Creditors typically prefer a consumer proposal over other options like bankruptcy, as it offers a higher chance of recovering at least a portion of the debt owed.
Steps To Adjust A Consumer Proposal
When you are in a consumer proposal, it’s important to be proactive. Keep track of your income, expenses, and any changes in your financial situation. If you anticipate that you may have trouble making a payment (due to a job loss, illness, or any other reason), contact your LIT right away to discuss adjustments to the payment amount or timeline that may be necessary to help you stay on track.
- Contact your licensed insolvency trustee.
- The trustee will assess your situation and may help you renegotiate the terms of your proposal.
- The creditors must approve any changes to the proposal.
- If approved, the proposal can be modified following the new terms.
Your LIT can help with amendments if necessary. The sooner you reach out, the more likely you are to avoid defaulting on the proposal.
Do You Need To Amend A Consumer Proposal?
Your LIT is your key point of contact during the entire consumer proposal process. If any issues arise—whether it’s difficulty making payments, changes in your financial situation, or challenges in meeting the terms of the proposal—it is crucial to reach out to your trustee immediately.
Your LIT can help adjust your consumer proposal and submit it again for approval with creditors. Your LIT is there to help you, and ensure you can avoid defaulting and stay on track to settle your debts. It’s important to communicate with your trustee so they know about any challenges you’re facing, and will be able to help assess your situation, explore the options available and ensure any changes are properly handled according to the law.
Contact Richard Killen now to learn more about consumer proposals or other options for debt relief. Our Licensed Insolvency Trustees can give you the expertise and support you need to achieve a debt free life.
