What Happens if You Miss Consumer Proposal Payments?

The rule depends on payment frequency

Section 66.31 of the Bankruptcy and Insolvency Act sets the deemed-annulment rule. Subject to a prior court order or a previously filed amendment, a proposal with monthly or more frequent payments is deemed annulled when the default reaches the equivalent of at least three payments. For payments less frequent than monthly, the rule is three months after default on a payment.

For a monthly schedule, the missed amounts do not have to come from three consecutive months. Partial shortfalls can accumulate. A weekly or biweekly schedule also falls within the monthly-or-more-frequent rule, so do not substitute a three-month assumption.

A worked example of accumulated arrears

Imagine a proposal requiring $300 each month. Three payments equal $900. This invented example shows why a series of partial shortfalls matters:

The arithmetic reaches three payment amounts even though only two months in the example have no payment at all. Your administrator must calculate your actual position under your agreement; bank withdrawals and the administrator's posting records should be reconciled if anything is unclear.

What to tell your LIT

Make the first message short and specific. State your name, the payment you are worried about, the reason your cash flow changed and the date you expect to know more. You do not need a polished recovery plan before making contact.

• Ask for the current amount in arrears and the next contractual due date.
• Explain whether the issue is a timing gap or an ongoing reduction in income.
• List any essential expenses that changed, such as housing, childcare or medical costs.
• Ask what documents the administrator needs to assess the options.
• Request written confirmation of any agreed next steps.

Keep a dated record of the conversation. If a payment failed because of a banking problem, save the notice and check whether it will be attempted again before arranging another payment. This helps you avoid both an unresolved failure and an accidental duplicate.

Amendment and revival are different

An amendment changes an existing proposal through the legal process. It is not simply a private decision to pay less. Section 66.37 provides for amendments before a proposal has been fully performed or annulled. Ask your LIT whether an amendment is available and what creditor consideration it requires.

Revival concerns a proposal already deemed annulled. Section 66.31 provides possible administrator-led and court routes in qualifying circumstances. Revival is not guaranteed, and sending money after annulment does not by itself establish that the proposal is active again. Get clear confirmation of its status from the administrator.

Act promptly if you receive an annulment or revival notice. Ask which deadline applies, whether objections are possible and what happens in the meantime. Do not rely on a general website timeline to decide when you must respond.

Other obligations also matter

The payment-default rule is not the only way a proposal can fail. Under section 66.3, a court may annul a proposal for default of a provision or other specified reasons. Read the whole agreement, including counselling and any additional terms, with your administrator.

Under section 66.32, annulment revives creditor claims less the dividends they received. This is not necessarily the total you paid to the administrator, because proposal payments also fund administration. Ask which creditors may act and what balance remains. If you made the proposal while already bankrupt, additional consequences can apply, so make sure the administrator addresses that situation specifically.

Reset the budget with realistic numbers

A plan to catch up should leave room for essentials and foreseeable bills. Rebuild the next month's cash-flow calendar from money you reasonably expect to receive, not a hoped-for bonus or new loan. Identify the dates when income arrives and major bills leave your account.

Our monthly budget guide gives you a worksheet for that conversation. It cannot amend a proposal or decide whether a missed payment is legally cured. For an active proposal, your administering LIT is the first contact, rather than a new referral form.