Missing a consumer proposal payment puts your plan at risk, and falling three payments behind triggers an automatic annulment under federal law. If that happens, your full debt is reinstated, and creditor protection ends.
If you’ve missed a payment on your consumer proposal—or think you’re about to and need to know what happens next—you’re in the right place.
This guide breaks down what counts as a missed payment and the steps you can take to steady things before your proposal is canceled.
By the end, you’ll know exactly what to expect and how to protect the progress you’ve already made.
Jump to:
- How do consumer proposal payments work?
- What are the immediate consequences of missing payments?
- What to do if you fall behind on your consumer proposal
- How to prevent future missed payments
How do consumer proposal payments work?
When you file a consumer proposal, a Licensed Insolvency Trustee (LIT) acts as the intermediary between you and your creditors (the person or organization you owe money to).
You make one fixed monthly payment, and your trustee distributes it among your creditors.
Depending on what you’ve chosen, your consumer proposal payments:
- Include the trustee’s regulated fees
- Are interest-free
- Can be made monthly, biweekly, or through lump sums
Because consumer proposals rely on payments being made on time, missing even one can create a backlog.
Your LIT will typically offer reminders or short grace periods, but under federal law, the limit for missed payments is quite strict.
Under Section 66.31 of the Bankruptcy and Insolvency Act, a missed payment under a consumer proposal is automatically annulled if:
- You miss three monthly payments, or
- You’re three months behind on your payment schedule.
Partial payments or short delays can count toward this total, so make sure you keep in close communication with your LIT if this is what you need to do.
If you miss even one payment, they will likely contact you to discuss your options before the proposal becomes inactive.
What are the immediate consequences of missing payments?
The immediate consequences of missed payments on your consumer proposal include:
- Your consumer proposal status becomes “at risk.”
- Creditor action is still paused, but they are notified of missed payments.
- Your credit score may be negatively affected if the delay continues.
- The trustee may issue a warning letter or request a catch-up plan.
Rising debt and credit worries weighing you down? Take a moment to speak with one of our Licensed Insolvency Trustees for expert advice on what to do next.
Call free on 800-268-8093 or leave your details with us and we’ll be in touch.
What to do if you fall behind on your consumer proposal
If you miss three payments or fall more than three months behind, your proposal is automatically annulled. When that happens:
- Your debt is reinstated in full. You’re responsible for the total amount owed, minus what you’ve already paid.
- Creditors regain their legal rights. They can restart collection calls, lawsuits, and wage garnishments.
- The CRA (Canada Revenue Agency) can add any interest and penalties back that were previously frozen.
- Your credit report shows “Consumer Proposal Annulled,” which can further damage your score.
How to fix missed payments before cancelation
If you’ve missed a payment, contact your Licensed Insolvency Trustee immediately. The earlier you act, the easier it is to fix.
LITs understand their clients’ financial setbacks and can often help create flexible solutions for them.
Options may include:
- Catch up on payments: Resume your plan by paying the overdue amounts.
- Request a temporary deferral: Your LIT can ask creditors for a short grace period.
- Amend your proposal: If your financial situation has changed significantly, your trustee and the creditors can vote to change the payment terms.
As long as your proposal hasn’t been annulled, these adjustments can be made relatively quickly.
Did you know? 1 in 3 Canadians cite ‘medical reasons’ and ‘relationship breakdown’ as the primary factors for their financial difficulty.
Reinstating or refiling a consumer proposal
If your consumer proposal has already been annulled, you can still request a revival.
Your LIT may help you file an application through the Office of the Superintendent of Bankruptcy or the court.
To reinstate:
- You must show valid reasons for the missed payments (job loss, illness, or emergency).
- Creditors or the court must approve the reinstatement.
- There is an automatic revival period in the first 30 days of annulment, allowing you to make up missed payments and revive the proposal
If reinstatement isn’t possible, you can file a new consumer proposal.
The new filing restarts the protection from creditors, allowing you to reestablish affordable payments.
How to prevent future missed payments
Once your proposal is back on track, it’s all about preventing future missed payments. Here’s how:
- Set up automatic payments through your bank or trustee portal.
- Track due dates with reminders or budgeting apps.
- Communicate income changes early so your LIT can help adjust payments.
- Build an emergency fund to cover at least one month of payments.
Get help before your consumer proposal is canceled
If you’ve missed a payment or are falling behind, it’s not too late to save your proposal. The Licensed Insolvency Trustees at Harris & Partners have decades of experience helping Canadians avoid annulment, modify proposals, and restore financial stability.
Book a free, confidential consultation today to learn how to keep your proposal active and your debt relief plan on track.
