It’s not as uncommon as you think for someone to become debt free by filing a consumer proposal, and then, years later, face financial hardship again and require another plan to pay off debt. The good news is, even if you have already achieved debt relief with a consumer proposal in the past, you can file a second consumer proposal for your current debt.
We explain below when it makes sense to file a repeat consumer proposal and how this actually works.
How do I file a second consumer proposal?
Filing a second or even third consumer proposal is no different than filing your first. You work with a Licensed Insolvency Trustee who will evaluate your budget to see how much you can reasonably afford to repay your creditors. Your LIT will present the proposal to your creditors who will vote on whether or not they accept it. Once the majority of your creditors accept, the proposal becomes binding on all of them.
It’s important to know, however, that you cannot file two consumer proposals at the same time. This means, you must have completed and been discharged from your first consumer proposal filing before filing a second one.
If however, you have completed your proposal and need to eliminate debts accumulated after the date of filing of your first proposal, you can file a consumer proposal again.
What if my first consumer proposal was annulled, can I file again?
A consumer proposal is deemed to be automatically annulled if you have missed three payments. If you defaulted on your consumer proposal, you cannot file a second proposal to pay off your old debts. Instead, the solution to this problem could be to revive your annulled consumer proposal.
A proposal can be revived automatically within 30 days of its annulment. However, if it’s been more than 30 days, you would have to go to court to revive it.
I am currently in a consumer proposal, but now I have new debt. Can I file a second proposal?
If you are currently in a consumer proposal but have incurred new debt during your filing, you cannot include this new debt in your current proposal. You also cannot file a second consumer proposal on this new debt while in an active consumer proposal. If this new debt is too much for you to repay on your own and keep going with your current proposal, you have options to collapse or amend the current proposal and file another insolvency, depending on your situation.
How long does a second consumer proposal stay on my credit report?
A second proposal filing is no different in terms of your credit than a first proposal. As with any consumer proposal, a note remains on your credit report for 3 years after completion or 6 years after that date of filing, whichever comes first.
How many consumer proposals can you file in your lifetime?
Legally there is no limit to how many consumer proposals you can file in Canada. And unlike bankruptcy there are no mandatory limitations in terms of time or cost either. If you file bankruptcy a second time you will be bankrupt longer. If you file bankruptcy a third time you will be required to attend court to obtain your discharge. With a consumer proposal, the success of your repeat proposal will depend entirely on what your creditors are willing to accept.
Does a second consumer proposal cost more?
No. As with any consumer proposal, the cost of a proposal is based on your personal situation. If you have consistent repeat creditors, like Revenue Canada, they may require more onerous proposal terms in each subsequent proposal.