What happens to your assets when filing a consumer proposal?

It is common for individuals to worry that filing a consumer proposal will mean that they need to surrender their assets, but in Canada fortunately this is far from the reality.

In fact, one of the key advantages of a consumer proposal is the ability to keep your assets while gaining debt relief. This is something crucial to bear in mind when considering your debt relief options, particularly if you have property equity, a new car, or would like to keep your savings and investment accounts. Below, we outline what happens to your assets when filing a consumer proposal.

Can I keep my house when filing a consumer proposal?

The first point to note is that as long as you can maintain your monthly mortgage payments, you may keep your house when filing a consumer proposal in Canada. As a mortgage is a secured debt, it is treated differently to unsecured debts. This means that a mortgage lender does not have the right to act on you or change your mortgage terms because you have filed a consumer proposal, unless you become behind on your agreed monthly mortgage payments.

 

How will filing a consumer proposal affect my mortgage?

If you are not paying your mortgage payments on time, a lender may change the terms of your mortgage or indeed foreclose on your home if they feel you cannot afford to pay for it. If you need to renew your mortgage during a consumer proposal with your current lender, this should not be an issue provided you are making your payments on time. Switching your mortgage lender may be a little bit more difficult. This is because a new application will be required, and filing a consumer proposal may impact your application and approval. Although it does not necessarily mean you will be refused, it could mean you have a higher interest rate on your mortgage payments. It is a good idea to discuss your assets and mortgage with your Licensed Insolvency Trustee for advice on your best debt relief options.

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Enter your total unsecured debt. Unsecured debt means debt that is not tied to an asset or collateral like credit cards. Do not include any secured debt (like mortgages, car payments, etc.).
A Spergel Consumer Proposal is structured into monthly payments paid over a period of up to 5 years. You will not pay additional interest or fees during that time.

How can I get a house after filing a consumer proposal?

In Canada, it is very possible to buy a home and get a mortgage after filing a consumer proposal. Although having a consumer proposal will show on your credit report, it is temporary and there are actions you can take to help build your case for applying for a mortgage successfully. An important step to take is to begin rebuilding your credit. This becomes much easier once your fixed, affordable monthly consumer proposal payment is in place and you can start to save money. Equally, having a substantial downpayment to put down on a mortgage and a steady income will help your case once you have completed your consumer proposal. Discover more about life after filing a consumer proposal.

 

Can I keep my car when filing a consumer proposal?

Contrary to rules with assets when filing bankruptcy where you can keep just one vehicle valued below the provincial limit, when it comes to a consumer proposal, you may keep all vehicles, irrelevant of value. This is applicable also to any car loans or financed vehicles. As consumer proposals are for unsecured debt, it all works a little differently when it comes to secured debts like car loans. As long as you are able to stay current on any agreed monthly payments, there is no reason why filing a consumer proposal would affect you keeping your vehicle. If, however, you miss payments, your lender may repossess your vehicle. If you feel like this could happen, it is a good idea to discuss an action plan with an experienced Licensed Insolvency Trustee.

 

How are my RRSPs, RESPs, and investments affected by filing a consumer proposal?

In Canada, when you file a consumer proposal, you are entitled to keep any contributions made towards an RRSP. Only when you file bankruptcy would any contributions made in the past twelve months need to be surrendered to a Licensed Insolvency Trustee. A consumer proposal also allows you to keep RESPs and any other investments you may have contributed to. If you have investments, this makes a consumer proposal a great alternative to filing bankruptcy.

Book a free consultation

Understanding the impact of a consumer proposal on your assets including your home and car can be stressful. At Spergel, our experienced Licensed Insolvency Trustees have helped over 100,000 Canadians become debt free. Book a free consultation to find out the best way for you to gain debt relief while keeping your assets.

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.