Life After Filing a Consumer Proposal in Canada

While filing a consumer proposal needs to be a considered decision and one made by ruling out other bankruptcy alternatives, it is a pathway for many to begin a new life free from debt.

Filing a consumer proposal is a government backed debt settlement, resulting in a huge reduction in debt while allowing you to keep your assets. It can be confusing navigating the best way to begin a fresh financial start and rebuilding credit, which makes it important to discuss your future with a Licensed Insolvency Trustee. Below are the key impacts of filing a consumer proposal in Canada.

How will filing a consumer proposal affect me in the future?

The primary advantage of filing a consumer proposal in Canada is that your overwhelming debts are reduced and consolidated into one affordable monthly, interest-free payment. A stay of proceedings is actioned, meaning creditors are no longer able to contact you or pursue lawsuits against you. In fact, it is the pathway to a fresh financial future. There is, however, some impact of a consumer proposal on your financial future, including your credit report. Yet once you have completed your consumer proposal, credit rating agencies will be notified and you can begin to rebuild your credit rating. This can be done by regularly using secured credit cards, paying all bills on time, and using a single favoured bank for your finances. It is a good idea to discuss the impact of filing a consumer proposal with an experienced Licensed Insolvency Trustee.

What are my obligations during a consumer proposal?

Although there is not the same level of duty required as when filing bankruptcy, filing a consumer proposal does mean that you take on some obligations. These include ensuring all agreed monthly payments are made on time, and attending two credit counselling sessions to learn more about financial management. There is no requirement to report on income and expenses.

How will my assets be affected by filing a consumer proposal?

In Canada, one of the primary advantages of filing a consumer proposal over declaring bankruptcy is that you are able to keep your assets. As assets like property and vehicles are financed as secured debts, as long as you can make your monthly payments you may keep them. You are also able to keep contributions towards savings and investment accounts, including RRSPs and RESPs. Learn more about your assets and filing a consumer proposal.

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What is the impact of a consumer proposal on my credit report?

Because in Canada consumer proposals are legally supported, all consumer proposals must be reported to the Office of the Superintendent of Bankruptcy and subsequently on to credit bureaus. A notice will be logged with the date you filed for a consumer proposal, which will remain on your credit report for three years after your proposal is completed. Following completion, the notice will be removed from your credit report by the credit bureaus. Most individuals notice an improvement in their credit score not long after completing their consumer proposal.

How long does a consumer proposal last?

As laid out by Canadian legislation, a consumer proposal may be spread out across a maximum of sixty months, or five years. This is so that affordable monthly debt repayments can be spread out across a reasonable amount of time for the debtor. Ultimately, in Canada, no consumer proposal would take longer than five years. It is possible to pay off your consumer proposal earlier or by making a lump sum payment, should you find your financial situation improves. In turn, this will reduce your consumer proposal term.

What happens after a consumer proposal?

For many, filing a consumer proposal is the first step to finding freedom from the burden of overwhelming debts. From this point forward, you will be left with a reduction in debt that simply needs to be paid off through manageable monthly payments. Often this means that due to the reduced payments required, you can begin to save money and rebuild your credit. It is a good idea to speak to your Licensed Insolvency Trustee about how you can take action to rebuild your credit history. This could lead to obtaining a low-interest loan or even a mortgage.

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Learn more about life after a consumer proposal and building your financial future by arranging a free consultation with one of our experienced Licensed Insolvency Trustees. We have helped over 100,000 Canadians gain debt relief, and have years of experience in filing consumer proposals.

Eli’s Path to Debt Freedom

After cashing out an RRSP to pay for his wedding. Eli received an unexpected tax bill. With his other debts he could not afford to pay and eventually the debt grew. CRA decided to initiate a wage garnishment. We helped Eli avoid bankruptcy with a Consumer Proposal. Debt consolidation saved Eli’s pay cheque and his Consumer Proposal taught him to plan for unexpected expenses in the future.

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