Consumer proposals offer debtors relief from their debt burden by reducing the amount they owe, but did you know that they can also offer some flexibility to be restructured if the debtor’s circumstances change? As this case shows, creditors may accept an amendment to a consumer proposal, especially if the debtor’s situation has changed for the worse.
A few years ago I met with an individual who was employed and making a good income. However, he didn’t have any assets and was trying to deal with an unmanageable debt load, so a friend referred him to me. We discussed his situation and decided that a consumer proposal would be the best option for him. It was structured so that he would pay $650 per month for 5 years. It was manageable for him and made sense for the creditors, who accepted it.
The consumer proposal payments were paid faithfully for two years. Around that time he lost his job and was diagnosed with cancer, resulting in him being unable to maintain the monthly payments. He did begin collecting employment insurance (EI) and Canada Pension Plan (CPP), but it was not enough to cover his living expenses and pay the consumer proposal.
Due to his deteriorating situation, this person came to see me again. We figured out he could manage $100 per month for the remainder of his consumer proposal. We proposed this to the creditors and they accepted it.
Due to his unforeseen circumstances, it made sense for the creditors to accept this amendment, as they would likely not receive anything if he were to go bankrupt. In this case he had come so far and didn’t want to file a bankruptcy.
Needless to say, everyone was happy with the resolution. The debtor was able to continue paying off his debts while he regained his health, and the creditors were still able to recover some of their debt.
I’ve had several cases where deterioration in a person’s health has made their debt burden worse, even to the point where it becomes unmanageable. But, as this case shows, a consumer proposal can offer more options than you think, under the advice of an experienced debt solutions professional like myself.