What are the consequences of not paying my consumer proposal?

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Struggling with consumer proposal payments? Missing them could nullify your protective shield, letting creditors demand payment again. Your trustee can help if payments seem tough—consider a chat to explore options like payment adjustments or even bankruptcy. Remember, proactive planning is key!

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Question

What happens if I cannot pay my consumer proposal? I’m worried about missing a payment or two and what that might mean for me. It’s helpful to understand what the consequences are so I can plan ahead if needed. What’s the backup plan if payments stop?

From: Anonymous Question, Ontario (ON)

Debt Insiders Answer

If you’re struggling to keep up with your consumer proposal payments, it’s essential to understand the potential ripple effects. Missing payments could lead to your proposal being nullified, meaning you lose the shield it provides against those persistent creditors. Your unpaid debts would then come knocking again, demanding immediate attention. If you happen to miss several payments, your licensed insolvency trustee might issue a Notice of Default, officially ending the proposal and giving creditors the green light to reinstate collection efforts. On a brighter note, if you sense that making payments might be tough, having a heart-to-heart with your trustee could be beneficial. They might help tailor a payment plan that you can handle or explore other avenues like bankruptcy if necessary. The key takeaway here? Being proactive and having a solid financial strategy can make a world of difference.

From: Anonymous Question

Office of the Superintendent of Bankrupty (OSB) Answer

If you cannot pay your consumer proposal, missing a payment or two can lead to serious consequences. According to the Bankruptcy and Insolvency Act, specifically section 66.34, if you default on your consumer proposal (which usually involves not making payments as agreed), the proposal may be annulled. This means that creditors can seek to recover the total amount owed without the protections provided by the proposal.

If your proposal is annulled, you could face collection actions from creditors, and they may initiate legal proceedings to recover debts. Additionally, once the consumer proposal is annulled, it can impact your credit rating and remain on your credit report for up to 3 years after the annullment.

As a backup plan, if you anticipate difficulty in making payments, you should contact your Licensed Insolvency Trustee as soon as possible. They may help you revise the proposal or explore alternative arrangements. You might also consider filing for personal bankruptcy, which is governed by section 66.1 of the Bankruptcy and Insolvency Act. This can provide a fresh start but has its own set of consequences.

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 the scenario of not being able to pay a consumer proposal, based on common concerns and online search trends:

1. What happens if I miss a payment in my consumer proposal?

If you miss a payment, your legal creditor protection may end, and your creditors can resume collection activities.

2. Can I change the terms of my consumer proposal if I cannot pay?

Yes, you can try to change the terms of your proposal or negotiate with your creditors to resubmit the proposal.

3. Will I lose my creditor protection if I cannot pay my consumer proposal?

Yes, if you fail to complete the payments as agreed, your creditor protection will end, and creditors can pursue you for the full amount of the debt.

4. Can I pay off my consumer proposal early if my financial situation improves?

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

5. What are my alternatives if my consumer proposal is not accepted or if I cannot pay?

You may consider other alternatives such as filing for bankruptcy, debt consolidation, or negotiating a new agreement with your creditors.

References

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