Under Section 66.37 of the Bankruptcy and Insolvency Act, you can file an amended Consumer Proposal if your income drops due to having a baby. Renegotiating your monthly payments through your Licensed Insolvency Trustee can prevent your proposal from being annulled, saving you from standard creditor collections. Filing an amendment is completely free ($0 CAD out-of-pocket) as trustee fees are drawn directly from your existing proposal payments.
Welcoming a new baby is an exciting milestone, but it also brings major financial changes. If you are currently paying off debt through a Consumer Proposal, transitioning from your regular salary to Employment Insurance (EI) maternity or parental benefits can cause a severe cash flow shortage. Childcare costs, diapers, and a reduced income make it extremely difficult to maintain your agreed-upon monthly payments.
Missing three payments will automatically annul your Consumer Proposal, meaning your creditors can immediately start calling, garnishing your wages, and freezing your bank accounts. 💰 Fortunately, Canadian insolvency law offers a lifeline. You have the legal right to request a reduction in your payments due to this significant life event. While a Licensed Insolvency Trustee (LIT) manages this process, many families also consult with a local Canadian law firm if they need help navigating broader employment and maternity leave rights.
Step-by-Step Process in Canada
Whether you live in Toronto, Calgary, or Halifax, consumer proposals are governed federally by the Office of the Superintendent of Bankruptcy (OSB). This means the rules to amend your payments are identical across every province. Following the correct steps ensures your creditors understand your new financial reality.
Step 1: Calculate Your New Household Budget
Before you contact anyone, you need to know exactly what you can afford. 📊 Sit down and calculate your total monthly EI income alongside your new baby-related expenses. Be honest about your grocery bills, utility costs, and rent. You need a realistic number to present to your trustee.
Step 2: Contact Your Licensed Insolvency Trustee Immediately
Do not wait until you miss a payment. As soon as you know your income will drop, contact the LIT who filed your original proposal. They will review your new budget and advise you on whether an amended proposal is your best option, or if you should temporarily defer a payment if your cash flow issue is only short-term.
Step 3: Draft the Amended Proposal (Section 66.37)
If you cannot afford the current terms, your LIT will use Section 66.37 of the BIA to draft an amendment. 📄 This document formally asks your creditors to accept lower monthly payments or to extend the length of your proposal (up to a maximum of 60 months). You will need to provide proof of your pregnancy or birth, along with your updated income statements.
Step 4: Creditor Voting Period
Once filed, your creditors have 45 days to review the new terms. They can vote to accept or reject your lower payments. Because creditors know that rejecting the amendment might force you into bankruptcy (where they would get even less money), they generally accept reasonable amendments caused by a legitimate life event like having a baby.
Step 5: Court and OSB Approval
If the creditors accept the amendment, it is subject to a 15-day waiting period for court approval. 📖 Once approved, your new payment schedule becomes legally binding. You must stick to these new terms strictly, as a second default could be disastrous.
How Much Does it Cost in Canada?
Filing an amendment does not mean paying your debts off in full, and it does not require you to pay any separate out-of-pocket fees to your trustee. 💳 Under the BIA, LIT fees are drawn directly from the payments you are already making into the proposal pool. Below are estimated costs in Canadian dollars (CAD).
| Expense Type | Estimated Cost (CAD) | Details |
|---|---|---|
| LIT Amendment Fee | $0 | Administratively drawn directly from existing proposal payments |
| Missed Payment Penalty | $0 | If amended successfully before 3 missed payments |
| Creditor Meeting Fee | $100 – $200 | Only if creditors demand a formal meeting |
| Lawyer Consultation | $150 – $350 | If you need legal advice regarding debt collections |
Remember, if your proposal is annulled, your creditors can instantly add back all the interest you previously saved. Paying a small amendment fee is always better than losing the legal protection of your proposal.
How Long Does the Process Take?
Amending a proposal is a formal legal process that requires patience. 🕐 You must keep making whatever payments you can while the vote is happening.
- Drafting the Amendment: Your LIT can usually prepare the paperwork within 1 to 2 weeks.
- Creditor Voting: Creditors are legally given 45 days to vote on your new payment plan.
- Final Approval: After the vote, there is a mandatory 15-day waiting period for official court approval.
- Maximum Proposal Length: Even with an amendment, your Consumer Proposal cannot exceed 5 years (60 months) in total from the original filing date.
Frequently Asked Questions (FAQ)
What happens if the creditors reject my amendment?
If the creditors reject your lower payments, your original payment schedule remains in effect. If you cannot afford those original payments, your proposal will likely be annulled, and you may need to file for personal bankruptcy.
Can I just skip payments while on maternity leave?
No. If you miss three payments (they do not have to be consecutive), your proposal is automatically annulled by law. You must proactively amend the proposal before you hit that limit.
Will the Canada Child Benefit (CCB) affect my proposal?
Generally, CCB payments are protected from creditors and are meant to support your child. However, this money is considered part of your household income when calculating your new monthly budget for the amendment.
Can I extend my proposal past 5 years?
No. Under Canadian law, a Consumer Proposal cannot last longer than 60 months. If you are already in month 40, your amendment must fit the remaining payments into the final 20 months.
Should I hire a lawyer to negotiate my debt?
Only a Licensed Insolvency Trustee can formally amend a Consumer Proposal under the BIA. However, a Canadian law firm can help if creditors illegally harass you during the process or if you face complex family law issues.
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