In Canada, you cannot have multiple active consumer proposals at the same time. To consolidate new debt or change your payment terms, you must legally amend your current proposal or annul it entirely to file a new one through your Licensed Insolvency Trustee.
Dealing with overwhelming debt can be stressful, especially if you have already filed a consumer proposal but find yourself facing new financial challenges. Whether you live in Toronto, Calgary, or Halifax, life is unpredictable. Job losses, medical emergencies, or a sudden increase in the cost of living might leave you wondering if you can consolidate multiple consumer proposals to lower your monthly payments. Under the federal Bankruptcy and Insolvency Act (BIA), the short answer is no-you are legally restricted to one active proposal at a time.
However, this does not mean you are out of options. The Canadian legal framework allows you to restructure your existing agreement. By working closely with a Licensed Insolvency Trustee (LIT), you can potentially amend your current terms, or seek a court order to annul the original agreement to include new debts in a subsequent filing. This guide will explain the legal avenues available to Canadian residents who need to modify their debt restructuring plans. If you find the process overwhelming, we highly recommend searching our directory to find a qualified local lawyer or LIT to guide you safely through your financial recovery.
Step-by-Step Process to Restructure a Consumer Proposal in Canada
Because insolvency is governed by federal law, the rules are uniform across the country, from British Columbia to Newfoundland and Labrador. However, your specific local office of the Office of the Superintendent of Bankruptcy (OSB) will oversee the legal filings. Here is the general path most applicants take when they can no longer meet their original terms.
Step 1: Financial Assessment and Gathering Documents
Before making any legal moves, you must determine exactly why your current proposal is failing. Gather your recent pay stubs, bank statements, and any notices of new debts (such as outstanding amounts owed to the Canada Revenue Agency or new credit card balances). 📊 You will need to prove to your creditors that a material change in your financial situation has occurred. If your income has dropped, document this clearly.
Step 2: Meeting with Your Licensed Insolvency Trustee
Your LIT is the only professional legally authorized by the Canadian government to administer or amend a proposal. You cannot do this through a regular debt consolidation company. Schedule a meeting with the LIT who filed your original paperwork. You will discuss whether an Amendment (changing the monthly payment amount of the existing proposal) or an Annulment and Refiling (cancelling the first proposal to include new debts) is the right strategy for you.
Step 3: Filing an Amended Proposal
If you only need to lower your payments and do not have new debts, your LIT will draft an Amended Consumer Proposal. This legal document is sent to your creditors. They will be asked to vote on the new, lower payment terms. The creditors have 45 days to accept or reject the amendment. During this time, your regular payments may be paused or adjusted depending on the LIT’s advice.
Step 4: The Annulment Route
If you have accumulated significant new debt since your first filing, an amendment will not protect you. Instead, your current proposal will eventually be annulled due to missed payments. 🚨 Be very careful: annulment immediately revives your old debts, meaning creditors can resume collection calls or wage garnishments. Under section 66.32(1) of the BIA, once a consumer proposal is annulled, you cannot simply file a brand-new proposal for the same debts without first obtaining a formal court order from the bankruptcy court. The process of getting court permission to refile is complex and costly. Alternatively, you may attempt to revive the annulled proposal within 30 days by paying all arrears to your LIT (or later via a court order), or you may need to file for personal bankruptcy.
How Much Does it Cost in Canada?
One of the main benefits of using the federal insolvency system is that the fees are strictly regulated by the government. You do not have to worry about hidden legal fees.
- Upfront Fees: Most LITs do not charge upfront fees for a consultation or to draft an amendment.
- Trustee Tariffs: The LIT’s fees are deducted directly from your monthly proposal payments. If your amended payment is $200 CAD per month, the LIT takes their legally mandated percentage from that amount; you do not pay extra on top.
- Court Fees: Generally, there are no direct court filing fees for the debtor when amending a proposal, as the OSB filing fees are covered within your monthly payments.
- Lawyer Fees: If you hire a private insolvency lawyer for independent legal advice, expect to pay between $300 and $500 CAD per hour, though this is rarely required for standard BIA filings.
| Strategy | Best Used For | Financial Impact |
|---|---|---|
| Amendment | Lowering monthly payments on existing debt. | Protects current agreement; no risk of immediate wage garnishment. |
| Annulment & Refiling | Including new debts accrued after the first filing. | High risk. Requires a formal court order to refile for the same debts. Temporarily removes legal protection against creditors. |
How Long Does the Process Take?
Timeframes in insolvency law are strict. If you are filing an amendment, your creditors have exactly 45 days to vote on the new terms. If no creditors request a meeting within those 45 days, the amended proposal is deemed accepted. ⏱️ However, under the BIA, the total payment term of your amended proposal cannot exceed 5 years (60 months) from the date the original (first) consumer proposal was filed. Amending an existing agreement does not extend or reset the 5-year limit; extending the timeline for a full new 5-year term is only possible by formally filing a completely new consumer proposal.
Frequently Asked Questions (FAQ)
Can I keep my house if I amend my proposal?
Generally, yes. A consumer proposal is designed to protect your assets, including your home. As long as you continue paying your mortgage, restructuring your unsecured debt should not affect your property ownership.
Will amending my proposal hurt my credit score further?
Your credit report will already show an R7 rating from your initial filing. Amending the terms extends the time it takes to complete the process, which delays when the R7 rating is eventually removed (usually 3 years after completion), but it does not create a second negative hit.
What happens if creditors reject the amendment?
If creditors reject your amended offer, you are generally expected to fulfill the terms of the original agreement. If you cannot afford the original terms, the proposal will eventually be annulled, and you may need to consider filing for personal bankruptcy.
Can I include Canada Revenue Agency (CRA) debt in the new proposal?
Yes. Debts owed to the CRA for income tax or HST can be included. However, the CRA has specific voting guidelines and may demand specific terms before they accept an amended or newly filed proposal.
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