In A Consumer Proposal – Is Changing To Bankruptcy An Option?

| Category: Consumer Proposal in Ontario
Category: Consumer Proposal in Ontario

Question: My wife and I are in the second year of a consumer proposal. She has recently lost her her job and acquired further debt over 40,000. Debt is in her name can she file bankruptcy in Ontario while still in proposal?

bankruptcy or consumer proposalAnswer: Yes.  It is not uncommon to have a change in circumstances while you are in a proposal, and it is possible to file bankruptcy while in a proposal.

Your wife will have to explain to the trustee how she managed to acquire $40,000 worth of debt while in a proposal, since while you are in a proposal she would have already have surrendered all of her credit cards and bank loans.  (It’s possible that the debt arose as a result of the repossession of a car or house that she had intended to pay for, so there might be a realistic explanation, but it’s a question the trustee will ask).

If she had not acquired new debt, another option is to ask the creditors to amend the original proposal so she can make lower payments.  There is no guarantee the creditors would agree, in which case she would do the bankruptcy.