Once you’ve filed a consumer proposal and it has been accepted by your creditors, it is legally binding on both you and them. You must make the payments you’ve agreed to, and your creditors cannot take any further action against you as long as you’re doing so. If you fail to hold up your end of the agreement, however, the situation changes.
By law, you may miss up to two payments during your proposal term without triggering any consequences. (You’ll still have to make the payments, but they’ll be tacked on at the end of your proposal term). If you miss a third payment at any time, however, your consumer proposal will be annulled. This means your creditors will once again be free to start collections and/or other legal proceedings against you.
Your proposal trustee will have worked hard to make sure your proposal is reasonable for both your creditors (in terms of their repayment) and for you (in terms of affordability), but sometimes circumstances change: i.e. you may lose your job, be laid off, or face some other unexpected financial setback. If this happens, don’t wait until you’re one or two payments behind — let your trustee know immediately. Depending on the situation, you may be able to amend your proposal. If you wait until you’re already in default and the proposal is annulled, however, you will not be able to file a new one.
A note of caution: a proposal amendment shouldn’t be taken lightly. As soon as you file an amended proposal, your current one no longer applies. Your proposal will have to go through the creditor approval process all over again, and if your creditors refuse the amended version, you cannot go back to the original terms. If you’re in doubt as to whether an amendment is a good idea, speak with your proposal trustee.
While defaulting on a proposal does not mean you’re automatically bankrupt, filing for bankruptcy may need to be your next step if you’re unable to meet your creditor obligations. Again, your proposal trustee will be able to help you with this decision.