What Happens If You Miss Consumer Proposal Payments?

Your consumer proposal may have been perfectly affordable when it started. Then your rent increased, your work hours changed, your car needed an expensive repair, or your grocery budget suddenly stopped stretching as far as it used to. If your next proposal payment is becoming difficult to cover, knowing what happens if you miss consumer proposal payments can help you act before one financial setback becomes a bigger problem.

At D. & A. MacLeod Company Ltd., we understand that a missed payment does not necessarily mean someone has stopped taking their debt obligations seriously. If your circumstances have changed, speaking with your Licensed Insolvency Trustee (LIT) early is one of the most important steps you can take. We help people in Ottawa and across Ontario understand their options.

Does One Missed Consumer Proposal Payment Cancel Your Proposal?

Not necessarily. For proposals with payments due monthly or more frequently, Canada's Bankruptcy and Insolvency Act provides that a consumer proposal is deemed annulled when the debtor is in default by an amount equal to or greater than three payments, unless the court has previously ordered otherwise or an amendment has already been filed. The missed payments do not have to be consecutive. For payments due less frequently than monthly, deemed annulment generally occurs three months after a payment goes into default. 

That distinction matters. Rather than waiting until your missed payments accumulate, contact the LIT administering your consumer proposal as soon as you know your normal payment schedule is becoming difficult.

What If Your Consumer Proposal Is Annulled?

An annulment can have serious consequences. A consumer proposal normally provides legal protection from affected unsecured creditors, including stopping legal recovery actions such as wage garnishment while the proposal remains in effect. Once the proposal is annulled, creditors can generally resume collection for their original claims, less any payments they received through the proposal. Annulment does not automatically make you bankrupt unless the proposal was filed while you were already bankrupt. 

This can be especially important if wage garnishment or creditor pressure was one of the reasons you originally filed. The situation may not be irreversible, either. A deemed-annulled proposal may be revived through your LIT or by court order under the Act, but revival is not guaranteed. Contact your LIT promptly because some revival procedures have strict deadlines. 

Your Budget Changed. What Should You Do Now?

Don't simply silence your trustee's emails and hope next month's budget is better.

Instead:

• review what caused the shortfall

• determine whether the problem is temporary or ongoing

• avoid taking on expensive new debt simply to make a proposal payment

• contact your LIT and explain what has changed

• review the options available for your specific proposal

For example, someone whose hours were temporarily reduced faces a different problem from someone whose household income has permanently dropped. Additional credit counselling or debtor assist support may also help you understand where your budget stands today.

What If Your Consumer Proposal Is No Longer Affordable?

This is where an honest financial review matters. Before annulment, your LIT may help you propose an amendment to the payment terms, subject to creditor acceptance and any required court approval. If the proposal is revived, missed payments are not automatically forgiven; the applicable payment terms must still be met. Once a proposal is annulled, you generally cannot simply file another consumer proposal unless the court allows it or the relevant debts have been paid in full or discharged in bankruptcy. Your LIT can assess what options actually apply to your circumstances. 

If you're simultaneously dealing with tax debt, CERB repayment obligations or student debt, mention those concerns during the review rather than treating each problem separately. Where your circumstances have changed substantially, it may also be appropriate to discuss other debt relief possibilities, including whether personal bankruptcy needs to be considered. That does not mean bankruptcy is automatically your next step.

A Missed Payment Is a Signal to Talk, Not Hide

Understanding what happens if you miss consumer proposal payments is ultimately about knowing when to act. One difficult month can happen. Allowing payment problems to build without speaking to your LIT can put the proposal itself at risk.

If something has changed financially, tell us. The sooner we understand what's happening, the sooner we can discuss what options may be available.

Contact D. & A. MacLeod Company Ltd. to discuss your situation with a Licensed Insolvency Trustee. We offer in-person consultations and virtual appointments, so you can get practical guidance without letting embarrassment or uncertainty keep you from asking for help.