Can You Do a Consumer Proposal Twice?
Debt is a scary thing, and overcoming debt once is tough enough. However, the scary thing about debt is that once you become debt-free after filing a consumer proposal, there's no guarantee that you'll be out of debt forever. It's actually fairly common for someone to become debt-free by filing a consumer proposal and then find themselves drowning in financial troubles again down the road. There's no shame in falling into debt again. What's important is finding a way out.
Fortunately, 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.
This post explains the details of filing a second consumer proposal.
More Than Two Consumer Proposals?
Luckily for troubled businesses in Canada, there is no legal limit to how many consumer proposals you can file in Canada, as long as you qualify. The good thing about consumer proposals is that they're more flexible than filing for bankruptcy. Unlike bankruptcy, there are no mandatory limitations in terms of time or cost. If you file bankruptcy a second time, you will be bankrupt for longer. If you file bankruptcy a third time, you'll be faced with the additional hassle of attending court to get your discharge. With a consumer proposal, the success of your second (or third, or fourth) proposal will depend on what your creditors are willing to accept for this specific situation.
Filing Multiple Consumer Proposals
The process of filing a second or third consumer proposal is no different than filing your first. To do so, you'll need to work with a Licensed Insolvency Trustee who will evaluate your finances to see how much you can afford to repay your creditors and help get the ball rolling on the consumer proposal process. They will present the proposal to your creditors, who will then vote on whether or not they accept it. If most of your creditors accept, the proposal will succeed.
Keep in mind that you can't file two consumer proposals at the same time. So you'll need to have completed and been discharged from your first consumer proposal filing before filing a second one.
Limitations of Second Consumer Proposals
If you are currently in a consumer proposal but have accumulated new debt during your filing, you won't be able to include this new debt in your current proposal. You also can't file a second consumer proposal on this new debt while in an active consumer proposal. Suppose this new debt is too much for you to repay on your own and keep going with your current proposal. In that case, you have options to collapse or amend the current proposal and file another insolvency, depending on your situation.
Another limitation to filing a second consumer proposal is that you can't file one if your previous consumer proposal has been annulled. If you have missed three payments, your consumer proposal will be deemed to be automatically annulled. If you defaulted on your first consumer proposal, you can't file a second proposal to pay off your old debts. In this case, you'll have to revive your annulled consumer proposal.
You can automatically revive your consumer proposal within 30 days of its annulment. But you'll have to go to court to revive your old proposal if it's been longer than 30 days.
Effect on Credit Report
Your second consumer proposal filing will have the exact same effect on your credit report as your first; a note will remain on your credit report for three years after completion or six years after that date of filing, whichever comes first.