Date 09.06.21
George*, like many of the people we work with, had come to our offices with a lengthy list of debts owed to various companies, the largest being his tax debt to the Canada Revenue Agency (CRA). To make his situation more urgent, his bank accounts had just been frozen by the CRA and each pay cheque he received had a portion of his pay deducted by the CRA through his employer (known as a garnishment). George was feeling embarrassed and depressed about his financial pressures and he needed help.
We sat down with George and reviewed his entire financial situation: The debt owed to various companies (including the tax man), the income he had coming in monthly and the assets he owned (in his case, a company pension and a vehicle). We then developed an affordable consumer proposal offer for George after reviewing all of his options with him (he decided personal bankruptcy was not a viable option).
After signing the legal paperwork we had prepared for George, and attending a meeting with the licensed insolvency trustee to ensure George understood the terms of the consumer proposal, his documents were filed with the court and George’s protection went into place. We stopped his garnishment and unfroze his bank accounts. We also notified his creditors and gave them 45 days to vote on the terms of the proposal.
At the 45-day mark we had everyone but the CRA agreeing to George’s offer Another 21-day negotiation period occurred during which we discussed George’s situation with the CRA and had George consider a slightly higher settlement offer to satisfy their requests, which he agreed to. Then we received court approval fifteen days later. The proposal was now locked-in and the reduced payments formalized officially.
Once this occurs the consumer debtor really only has a few responsibilities to fulfill:
1. Make a pre-authorized proposal payment each month on a day (specified by the debtor)
2. Ensure any missed payments are replaced (cannot miss more than three payments)
3. Attend two counselling sessions (which we set up for George with a licensed counsellor)
At this point the process tends to run fairly smoothly. Payments come out of the consumer debtor’s bank account every month and are held in trust by the Trustee. Once enough funds have been collected, the Trustee issues a series of payments (usually once every six months or once a year).
Unfortunately, George, like some consumer proposal debtors, ran into some further financial difficulties as a result of a family member’s illness and a temporary job loss. That meant less income for him monthly and a resulting series of missed consumer proposal payments. He was notified each time a payment was missed and at first was able to catch up. But over time he fell behind one, two and then three payments.
Once a consumer proposal has three missed payments (without the debtor getting caught up on those payments by the due date of the third payment), the proposal is considered annulled. That meant George’s protection from his creditors ended. He started receiving renewed collection calls from his creditors and the CRA threatened to garnish his wages – again. He was frantic to resolve the situation.
But there was good news for George — he was able to investigate the possibility of reviving (restoring) his consumer proposal using the services of an insolvency lawyer to petition his request to the Bankruptcy court.
Alternatively, if George had been able to find the money the Trustee had requested before the date of his court hearing scheduled, the Trustee could have applied to the court for an order restoring the Consumer Proposal. But any creditor can file a notice of objection to this process and prevent the consumer proposal from being brought back to life if they believed George might miss his payments again.
The insolvency lawyer hired by George was ultimately successful in his efforts to get the consumer proposal brought back to life by the court, George, as promised, caught up on his missed payments and the Farber Administrator reviewed the court order and allowed the revival to occur. When this process happens to a consumer proposal it cannot contain any new debt incurred after the original date of filing. Only the original debts can be included.
If George had continued to suffer hardship and income garnishment, and could not get caught up on his missed payments, his alternative to having his consumer proposal brought back to life could have been the filing of a personal bankruptcy. In a bankruptcy estate he could have added any new debt he had incurred since the date of the original consumer proposal filing.
*not his real name