Key Takeaways
There are some options if your finances significantly change while in a consumer proposal. If your finances change for better or worse, it is recommended to speak with your Licensed Insolvency Trustee about your options, including doing nothing, amending your consumer proposal or considering another insolvency option, such as bankruptcy.
Before filing a consumer proposal, a common question is, what happens if I get a raise, lose my job, or decide to retire? A consumer proposal can take up to five years to complete, which can create uncertainty if something changes with your finances during that period.
This article will explain what happens if your finances change and how you can avoid defaulting on a consumer proposal.
What Happens if My Pay Increases While in a Consumer Proposal?
If your pay increases while in a consumer proposal, it's a good thing. You will have more money in your budget to pay for expenses and save more money. In addition, it won’t affect the monthly payments payable in your consumer proposal. Once your creditors and the court have approved your consumer proposal, the agreed total doesn’t change if your income increases.
This is different than a bankruptcy, where if your income increases, then your monthly payments may also increase while in bankruptcy.
What Happens if I Lose My Job while in a Consumer Proposal?
Losing your job while in a consumer proposal can be very stressful. However, it doesn't necessarily mean you will default on your proposal. If you lose your job, immediately let your Licensed Insolvency Trustee know. Your Trustee will work with you to find a solution that allows you to continue making your payments, which may include amending your consumer proposal.
If you cannot find a new job quickly, the Licensed Insolvency Trustee may recommend that you file for bankruptcy. Bankruptcy may be helpful if you have little to no income or assets. However, if you can still afford the monthly payments, your Trustee may recommend that you continue making your payments until you find a new job.
What happens if I Default on a Consumer Proposal?
Defaulting on a consumer proposal can have serious consequences. If you default on your proposal, your creditors will have their rights revived, which means they will regain the power to collect from you and charge you interest on your debts.
If you cannot make your payments, it's important to contact your Licensed Insolvency Trustee immediately before the proposal becomes annulled. The Trustee may be able to amend your proposal and reduce your monthly payments if your creditors agree to an amended consumer proposal.
If you default on your consumer proposal, you could consider reviving it or consider filing for bankruptcy. This will ensure all your unsecured debts will be discharged upon completing the bankruptcy.
What Happens if You Receive a Windfall Like an Inheritance or Lottery Winnings While in a Consumer Proposal?
Suppose you receive a windfall like an unexpected inheritance or lottery winnings while in a consumer proposal. In a consumer proposal, you get to keep all the money. However, as you still have to pay off the consumer proposal to discharge your debts, you could make a lump-sum payment or increase your monthly payments to pay off your consumer proposal early.
What if I Retire While in a Consumer Proposal?
You may be approaching retirement and uncertain if you will be able to continue working for the length of your consumer proposal. This may cause hesitancy to file a consumer proposal now. If you decide to retire before completing the proposal, your income may no longer be sufficient to cover your living expenses and the consumer proposal payments.
There are a couple of options for this situation. If you file the proposal while working and then decide to retire, you could speak with your Licensed Insolvency Trustee about amending your current consumer proposal to a lower amount with more affordable payments while in retirement. The Trustee will explain to your creditors that your earnings have significantly changed, and the creditors will vote to either accept or reject your amended proposal. The other option is to consider annulling the consumer proposal and filing for bankruptcy.
What Happens if I Get New Debt While in a Consumer Proposal?
You may have incurred new debts while in a consumer proposal or decided to return secured debts such as a vehicle and wonder if you can include those debts in your current consumer proposal or file another consumer proposal. Unfortunately, you can’t include the new debts in your current proposal. Your options would be to pay off the current proposal and then file a new proposal for the new debts or another insolvency option for all the debts, such as bankruptcy.
Conclusion
Filing a consumer proposal is a great way to get out of debt and start fresh. However, it's important to understand what happens if your finances change after filing a consumer proposal. If you lose your job or are unable to make your payments, it's important to contact your Trustee immediately. By working with your Trustee and sticking to your budget, you can avoid defaulting on your consumer proposal and become debt-free.
If you are experiencing financial difficulty, you may have other options to consider before choosing bankruptcy. Speak to a Licensed Insolvency Trustee at Litvack Group to review your options and find the right solution for your finances.