What Happens If Your Income Changes During a Consumer Proposal?

Entering a consumer proposal leaves many people feeling confident knowing they have a path towards paying off their debt. Occasionally, financial situations can change. This article explains how income increases and decreases are treated in a Consumer Proposal, what happens if payments become difficult to maintain, and how the amendment process works.

If Your Income Goes Up

A raise, bonus, overtime pay, commission, or higher self-employment income does not automatically change the payment terms in an accepted Consumer Proposal.

Additional payments may be made toward the remaining proposal balance. In many cases, you can pay off the entire balance at once. The advantage to paying your Consumer Proposal early is that you can focus on rebuilding your credit sooner; allocate future income that would have been spent on your proposal on your goals and feel better, knowing that the debts associated with your Consumer Proposal is behind you. Making additional payments is always optional.

If Your Income Goes Down

A decrease in income does not automatically reduce the amount required under a Consumer Proposal. If the agreed payments become difficult to maintain, a Licensed Insolvency Trustee (LIT) can review whether an amendment to the proposal terms may be available.

How an Amendment Works

An amendment is a formal request to change the terms of an existing Consumer Proposal. The proposed changes are submitted to creditors for consideration.

An amendment may change the payment amount, payment dates, or repayment schedule, but the proposal must remain within the legal time limit. If the amendment is not accepted, the original proposal terms remain in place.[

What Happens If Required Payments Are Missed?

The missed-payment threshold for automatic annulment depends on the payment schedule in the proposal. If payments are due monthly or more often, a default equal to three payments can result in deemed annulment. If payments are due less often than monthly, a missed payment may result in deemed annulment.

If the proposal is deemed annulled, creditors’ rights are revived for the amounts owed, less any amounts they received through the proposal.

If You Lose Your Job

Job loss may affect a Consumer Proposal if it makes the agreed payments difficult to maintain. In these situations, a LIT can review whether an amendment to the proposal terms may be available.

Income Change in a Consumer Proposal vs. Bankruptcy

Income changes affect Consumer Proposals and bankruptcies differently.

In an accepted Consumer Proposal, an increase in income does not automatically change the agreed payment terms.

In bankruptcy, income is reviewed during the process and may affect the amount paid and the length of the bankruptcy.[

Questions About an Income Change?

A Farber LIT can explain whether an income change affects the terms of your Consumer Proposal and whether an amendment may be available.

Current Farber clients with questions about an income change, proposal payments, or amendments can contact [team/contact].

Frequently Asked Questions

Does my consumer proposal payment go up if I get a raise?

No. An increase in income does not automatically change the payment terms in an accepted Consumer Proposal.

Can I lower my consumer proposal payment if I lose my job?

No, a job loss does not automatically lower the required payment amount. A LIT can review whether an amendment may be available.

Can I pay off my consumer proposal early?

Yes. Additional payments can be made toward the proposal, or the remaining balance can be paid before the original end date.[