How can I withdraw or get a discharge from a consumer proposal?

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If you need to exit a consumer proposal in Canada, act quickly and communicate with your Licensed Insolvency Trustee (LIT). If creditors haven’t agreed yet, you can withdraw. Otherwise, seek a discharge. If you’re struggling, discuss adjustments with your LIT instead of bailing out.

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Question

How do I get out of a consumer proposal? I’m thinking about how to exit a consumer proposal if things change for me. Knowing the steps and implications would be really helpful in case I need to make adjustments. How does one actually get out?

From: Anonymous Question, Alberta (AB)

Debt Insiders Answer

If you’re looking to step away from a consumer proposal in Canada, it’s all about timing and communication. Before it’s a done deal with creditors, you can simply withdraw your proposal. But if it’s already got the thumbs up, you might want to ask for a discharge. Now, if life throws a curveball—like losing your job or facing an illness—make sure to chat with your Licensed Insolvency Trustee (LIT) sooner rather than later. They’re your go-to for figuring out whether tweaking your proposal makes sense instead of leaving it altogether. Keep in mind, pulling out after creditors have given the nod means you’re still on the hook for your debts. This could lead you down the path to bankruptcy if you can’t see the proposal through. Both paths come with their own baggage for your credit and financial future, so it’s wise to think it all through carefully.

From: Anonymous Question

Office of the Superintendent of Bankrupty (OSB) Answer

To exit a consumer proposal, you can either complete the proposal as outlined, or you may choose to withdraw from it. If your circumstances change, you can apply to the Court for a discharge from the proposal before the completion of the payments.

1. Review the terms of your consumer proposal (Bankruptcy and Insolvency Act, RSC 1985, c. B-3, Sections 66.31 - 66.34). You must fulfill your obligations under the proposal as set out in the agreement.

2. If you cannot meet the terms any longer, speak with your Licensed Insolvency Trustee (LIT). They can guide you through the withdrawal process.

3. To withdraw, you will need to formally file a notice of withdrawal with the Office of the Superintendent of Bankruptcy (OSB) (Bankruptcy and Insolvency General Regulations, C.R.C., 1978, c. 369, Sections 20, 21).

4. Depending on the timing and circumstances of your withdrawal, creditors may claim the full amount owed or pursue other actions against you (Bankruptcy and Insolvency Act, RSC 1985, c. B-3, Sections 66.31).

5. Following the withdrawal, if you have not else declared insolvency, you may consider filing for bankruptcy as an alternative solution (Bankruptcy and Insolvency Act, RSC 1985, c. B-3, Sections 43-45).

Always consult with your LIT to understand the implications and ensure you comply with all legal requirements.

From: This answer is provided by scanning the OSB Bankruptcy & Insolvency Act and related directives

Related Questions

Here are the top 5 most frequently asked questions related to getting out of a consumer proposal, based on the provided sources and general trends in debt and insolvency inquiries:

1. What happens if my creditors do not accept my consumer proposal?

If your creditors do not accept your proposal, you can change the terms and resubmit, consider other debt alternatives, or file for bankruptcy.

2. Can I pay off my consumer proposal early?

Yes, you can pay off your consumer proposal early and begin the recovery process sooner.

3. How long does a consumer proposal last?

A consumer proposal can last up to a maximum of 60 months (five years), but you can shorten the term by making larger payments or a lump sum payment.

4. What happens if I fail to complete my consumer proposal payments?

If you fail to complete your payments, your legal creditor protection ends, and your creditors can pursue you for the original debt amounts.

5. Can I include all types of debt in a consumer proposal?

You can include unsecured debts such as credit cards, personal loans, and most tax debts, but not secured debts or certain other specific debts like student loans less than seven years old.

References

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