Consumer debt can weigh down on your finances, especially if you’re reckless with your spending and don’t have a solid strategy to pay off your debts. The good thing is that there are solutions to help you get out of a debt mire. The debt-relief option that you can take will depend on your financial situation and the extent of your debt problem.
A consumer proposal is a go-to solution for many people who are struggling with debt. This debt relief option is an agreement between you and your creditors through a Licensed Insolvency Trustee (LIT). It allows you to pay only a portion of your debt. Then, your creditors will discharge you from your debt when you fulfill the terms of the agreement.
While a consumer proposal can relieve one from his/her debt burden, it’s not uncommon that people revert to the same problem again after completing their consumer proposal. Thus, it’s apt to ask this question: can I file for a consumer proposal again?
In this blog post, we’ll explore if you can file a consumer proposal again. We also discuss other information you need to know about consumer proposals.
Can You File More Than Once?
This question is a pretty common one among debtors who are currently under a consumer proposal and those who want to file one.
Yes, it’s possible to file a consumer proposal more than once. If you met the agreed-upon terms of the contract and you’re discharged from your debt, then you can take on another consumer proposal if you find yourself in a debt problem again.
But there are certain limitations you need to be mindful of when filing a second consumer proposal. For instance, you can’t proceed with this action when you have failed to make payments on your current one. In this case, your consumer proposal will get annulled.
If you want to be forgiven of your current debts, you can revive your annulled consumer proposal – not to “file” for a new one. Typically, you can revive it within 30 days after its annulment. If this period has passed, you need to go to the court and get court approval to revive it or file for another consumer proposal.
Furthermore, if you incur new debt while you’re presently under a consumer proposal program, you can’t incorporate this new debt in your current arrangement. There’s also the prohibition against filing another consumer proposal before they discharge you from your current consumer proposal program.
If you’re having a hard time repaying this new debt and continuing with your existing proposal, you can choose to amend or collapse the current proposal and file for another one with terms that fit your circumstances.
How to File Another Consumer Proposal in Canada Step-By-Step
Filing your second consumer proposal is just the same process as the first. So, don’t fret as much when it comes to the process. You only need to make sure that you’re qualified to file another one. But if you forget the steps on how to file a consumer proposal, here’s a guide to follow.
Step 1: Contacting a Licensed Insolvency Trustee (LIT)
The first step is to work with a LIT to evaluate your qualifications for this debt-relief solution and whether it suits your income and total debt. The LIT will likely recommend a consumer proposal when other options like a debt management plan or debt consolidation aren’t right for you because you have low income or too much debt.
Qualifications for getting a consumer proposal in Canada are as follows:
- A citizen or a property owner in Canada
- The applicant must be in a state of insolvency
- Have a total unsecured debt of less than $250,000
- Must have the capacity to make payments per month in the long-term
- The applicant must not have an active consumer proposal
Step 2: Drafting of the Proposal
If you qualify according to the requirements mentioned above, the LIT will now develop a proposal and submit it to your creditors. Your creditors may allow you to pay only a percentage (from 40% to 70%) of your total debt.
Their decision will be largely based on your capacity to make a payment. However, they do not have to accept the proposal as they have needs and standards that will significantly affect their decision-making.
Your LIT must understand the needs and standards of your creditors when drafting the proposal to increase its chances of acceptance. Here are some fundamentals when developing a proposal.
The proposed repayment amount should be higher than the amount the creditors expect to receive under a bankruptcy arrangement. In this way, they will have a good reason to agree with the proposal.
The LIT should see to it that you can make monthly payments during the proposed repayment period. Otherwise, there’s a possibility that you’ll miss payments if you face unexpected expenses or loss of income.
Step 3: Filing of Consumer Proposal Documents
There are four necessary documents that the LIT must file on your behalf, namely: the Statement of Income and Expense, Statement of Affairs, Assessment Certificate, and the Consumer Proposal.
Step 4: Filing with the Official Receiver
Once you have the documents, it’s time for the LIT to file with the Official Receiver and notify your creditors. Once it’s filed, you’ll be protected from collection efforts in the form of calls, lawsuits, and garnishments.
Step 5: Your LIT will Send Notice to Your Creditors
The LIT will send notice to your creditors, who must respond within 45 days after receipt of the notice. The proposal is deemed accepted if the creditors don’t respond to it. If there are objections (must be at least 25% of the creditors) to the proposal, a meeting will be held with your creditors.
Yes, you can file another consumer proposal as long as you’re discharged from your previous one. This debt-relief option can benefit you significantly because you only pay a portion of your total debt. Make sure to learn more about debt-relief solutions at debt.ca if you’re currently facing a debt problem.