Debt Relief Options for Those Who Have Already Filed a Consumer Proposal
Just like any significant life event, debt and financial turmoil can strike twice – sometimes even more times – during a person’s life.
For those who have previously filed a consumer proposal, but find themselves back in debt years later, it can be frightening if you aren’t aware that you still have options the second time around.
To gain a better understanding of the debt relief solutions that are available, keep reading to learn more about consumer proposals and how often they can be filed.
What Is A Consumer Proposal?
A consumer proposal is a debt relief solution administered by a Licensed Insolvency Trustee (LIT), referred to in a consumer proposal as the Consumer Proposal Administrator, that allows you to reach a settlement with your creditors to pay back a reduced amount of the debt you owe, with the remaining balance forgiven.
A consumer proposal must be paid within an agreed timeframe – 5 years or less. Monthly payments are usually required. In exchange, the debt principle will be reduced, often very significantly, and you will not have to pay interest. Upon the filing of the consumer proposal, you will obtain legal protection from creditors and collection agencies. This means that they must stop calling you, writing you, suing, and garnishing you.
Typically, consumer proposals protect you from, and permit settlement with, your unsecured creditors, which means you will be able to eliminate debts such as:
- credit cards
- income tax and HST debts
- payday loans
- certain student loans
- bank loans
- lines of credit
- shortfalls on mortgaged assets sold by secured creditors
How Many Consumer Proposals Can You File in A Lifetime?
Legally, there is no limit as to how many times you can file a consumer proposal, provided only new debt, incurred post completion of the prior consumer proposal, is being addressed.
In other words, if you file a consumer proposal, pay it off, and incur new debts in the future, you are able to file a second consumer proposal for the new debts.
However, if you file a consumer proposal and it fails for any reason (often due to missed payments), you will not be able to file another consumer proposal on the same debts unless you get court approval.
The rules surrounding a consumer proposal are complex, so if you are considering filing a second consumer proposal, speak with a LIT to better understand the process and find out if you are eligible.
Filing a Second Consumer Proposal
As previously mentioned, to be able to file a second consumer proposal, you must have first completed the previous consumer proposal. Even if you have incurred new debts, you cannot file another consumer proposal until the previous consumer proposal has been completed.
Can You File Again if the First Proposal Was Annulled?
A consumer proposal is annulled, at an end, if you are in default on at least 3 months of payments. Annulment means you will no longer have protection from your creditors, allowing them to resume collection efforts against you for the full amount you owe them.
Fortunately, an annulled consumer proposal can be revived by the LIT within 30 days of its annulment with the creditors’ concurrence. But beyond the 30 days, you will need to go to court to have it revived. The LIT will explain this to you.
If your consumer proposal is annulled, and you are unable to revive it, you cannot file another consumer proposal to eliminate these debts. You will have to pay the debts or go bankrupt.
What Happens If You Incur New Debt While Still in a Consumer Proposal?
If you are currently in a consumer proposal and have incurred new debt since beginning the process, you cannot include this new debt in your current proposal.
You are also unable to file another consumer proposal for this new debt until your first consumer proposal has been completed.
However, if you have become overwhelmed by this new debt and cannot make payments while paying off your current consumer proposal, you still have options.
You can amend the current proposal to possibly reduce the payments, and continue paying the new debt in full, or file for bankruptcy to address all of your debts.
In this case, you would need to discuss the situation with your LIT to find out more about your options.
How Long Does A Second Consumer Proposal Stay on My Credit Report?
Unlike a second bankruptcy – which stays on your credit report for 14 years post discharge, a second consumer proposal will remain on your credit report for the same length of time as the first one post completion – 3 years.
All consumer proposals will appear on your credit report for the duration of the consumer proposal, and remain there for 3 years after it has been paid in full and completed.
Alternative Debt Relief Options
While a consumer proposal has many benefits, you also need to consider whether filing a second time is the best solution for you. If you are unsure whether to file another consumer proposal, consider these alternative solutions to help get your debt under control.
Debt consolidation allows you to combine most – if not all – unsecured debts – into one single debt. This is done by obtaining a debt consolidation loan.
So, rather than making multiple monthly payments towards several different debts, each with high-interest rates, you will only need to make one payment, possibly with a lower interest rate.
Please see other blog postings on our site that discuss consolidation loans.
Before filing another consumer proposal, speak with your LIT about debt counselling services.
With debt counselling, you can learn how to take control of your finances and overcome your debt by identifying issues you are having and to strategize appropriate solutions.
If you find yourself once again overwhelmed with debt, speak with a Licensed Insolvency Trustee to help you evaluate your current situation and come up with a plan for tackling your debt.
Baker Tilly Ottawa Ltd. is a Licensed Insolvency Trustee and Consumer Proposal Administrator. Its professionals have assisted thousands of individuals successfully resolve their debt crises and overcome financial turmoil since 2002. Its passion – its mission – is your health and well-being!