Question: Before our marriage ended we owed over $50,000 in credit card debt and on our line of credit. So we did not lose our home we signed a consumer proposal. We have since separated and are still having financial problems. What happens to our joint proposal if one or the other of us cannot pay our share of the proposal payments?
Amending A Consumer Proposal
Approximately 40% of all marriages in Canada end in divorce. It is not only a difficult time emotionally, but there are unfortunately financial implications to filing divorce that also need to be taken care of. In the case of a divorce happening after you filed a consumer proposal you have options.
Continue to make payments
As long as all of your consumer proposal payments are made, your proposal will continue. You should know however that under the Bankruptcy and Insolvency Act (BIA), if you fall behind by three consumer proposal payments, your proposal will fail. Technically, on the day your third payment comes due your consumer proposal is automatically deemed annulled or cancelled. At that point your creditors may pursue you. If they do, your only option may be to file for personal bankruptcy.
Amend your proposal
If after the divorce you find you are unable to meet your obligations under your original proposal, you should contact your trustee right away. It may be possible to amend the terms of your proposal. You and your trustee can discuss submitting an amended proposal to your creditors calling for lower monthly payments and perhaps an extended time period. You should be aware, however, that the creditors do not have to accept the terms of this new proposal. If that is the case you should talk to your trustee about declaring personal bankruptcy.
We suggest you contact a bankruptcy trustee to review your options.