Adjusting The Terms of a Consumer Proposal When Your Situation Changes

A consumer proposal is designed to offer anyone who has credit card, loan, or tax debt some relief from their debt burden by reducing the total amount owing and breaking it all down into manageable monthly payments. With no further interest being charged (and an end to collection calls or any threats of legal action), a proposal makes debt far more manageable. The companies owed money get to vote on the terms of the proposal and if a simple majority of them vote “yes” then the proposal is deemed accepted by all.  

But what happens in the case of a consumer proposal, which has been accepted by the creditors and is being paid monthly by the consumer debtor, if that person’s circumstances change?  It could be a loss of income, a serious illness, or even the death of a family member — any of these scenarios can upset a carefully crafted consumer proposal and make it difficult for the debtor to make regular payments.

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 did not 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 to 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 an inability 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 each month.

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 not receive anything if he were to go bankrupt. In this case he had come so far and did not want to file a bankruptcy.

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 have 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.

If you’re unsure where you are heading in your life, due to job loss, illness or other factors, and need to know how to keep your consumer proposal on track (or just talk about how to file a proposal) we are here to help!  Just click on the FREE CONSULTATION button, below, or give us a call today.