Consumer Proposals and COVID-19

Published by Mike Wright on

How is my Consumer Proposal Affected by the COVID-19 Coronavirus?

On March 25, 2020, the Office of the Superintendent of Bankruptcy (“OSB”) issued temporary guidance to Licensed Insolvency Trustees (“LITs”) entitled LIT Flexibility During the COVID-19 Pandemic:

“LITs are encouraged to exercise their professional judgment in using as much flexibility as possible to avoid unintended harm or prejudice in the current circumstances” and “to determine where flexibility within existing rules can be of most benefit to individual consumer and commercial debtors impacted by the pandemic.”

Also on March 25, 2020, various federal Acts were amended by a Bill entitled An Act respecting certain measures in response to COVID-19. There were no amendments to the Bankruptcy and Insolvency Act (the “Act”) and all provisions relating to consumer proposals remain in effect  without additional relief for debtors affected by the COVID-19 pandemic.

The Act provides that:

  1. A consumer proposal isn’t annulled (the legal word that means cancelled) unless:

    • Payments that are due monthly or more frequently are three months in arrears; or

    • A payment that is due less frequently than monthly is three months late.

  2. A consumer proposal can be amended (the legal word that means changed) at any time before it is annulled / cancelled.

  3. A consumer proposal that is annulled / cancelled can be revived:

    • Automatically if the Licensed Insolvency Trustee considers it appropriate and there’s no objection from creditors; or

    • By an Order of the Court.

If your financial circumstances have changed as a result of COVID-19 and you’re uncertain about your ability to comply with the payment terms of your consumer proposal, we recommend:

  1. Speaking with your LIT as soon as you think there might be a problem.

  2. Maintaining your regular payments, if possible.

  3. Paying what you can, if you’re unable to maintain your regular payments.

    • For example, if you pay ½ of your regular payment it will be 6 months before your consumer proposal will be annulled instead of 3 months. Adding just $1 more to your payments during those 6 months will delay annulment an extra month for a total of 7 months.

  4. Amending your consumer proposal before falling 3 months in arrears.

    • Given the extraordinary circumstances, we are hopeful that creditors will be accepting of amendments if the difficulties have arisen through a COVID-19 related income reduction or job loss.

To answer your questions about how consumer proposals are affected by the rapidly changing economic conditions, and to support you through any personal financial challenges you may be facing, we’ll be hosting regular online office hours. During these online Q&A sessions, there’s no agenda except to address your concerns and answer your consumer proposal questions.

To join, click:

Download the free RingCentral Meetings app.

The Next Online Consumer Proposal Q&A Session is Scheduled for:

Friday, April 24, 2020 – 12:00 – 1:00 pm PDT

We’re here to help, and we look forward to “seeing” you online to provide answers to all your financial questions. We have faith in our public health care system, our federal and provincial governments, and the strength of the Canadian economy and our financial institutions. Together we will get through this.