Life After a Consumer Proposal: What Happens Next?

If you are considering filing a consumer proposal, you’ll want to know what happens when it is finished. This post will look at life after a consumer proposal and what you should do next.

What happens after your consumer proposal is filed?

After you file a consumer proposal, you make a single payment to your Licensed Insolvency Trustee instead of paying your unsecured creditors.

Your creditors are notified, and they have 45 days to review your offer and respond. You don’t make any payments during this period, and there is no interest or charges.

Collection calls stop, and creditors can no longer apply wage garnishments or attempt to collect on the debts in your proposal.

What happens when you pay off a consumer proposal?

Once you’ve made all your payments, attended two financial counselling sessions and satisfied your consumer proposal terms, your Licensed Insolvency Trustee can complete your discharge.

You will receive a Certificate of Full Performance, which confirms that you’ve successfully fulfilled the consumer proposal’s terms.

Your trustee sends a final Statement of Receipts and Disbursements (SRD) and a Notice of Taxation of the Administrator’s Accounts and Discharge of Administrator to the Official Receiver. These documents are also sent to you and your creditors.

The government will notify the credit bureaus that you have successfully finished the consumer proposal.

Will a consumer proposal pay off my debt?

Upon completing your consumer proposal, any remaining balance is forgiven, and your Licensed Insolvency Trustee will discharge you (release you) from your debts.

You can only eliminate unsecured debts in a consumer proposal, including credit card debt, loans, lines of credit and tax debt. Some debts survive, including:

Support payments to a former spouse or children.
Fines or penalties imposed by the Court.
Debts from fraudulent activity.
Student loans under seven years old.
Secured debts such as a mortgage or car loan.
Property taxes.
An award by a civil court for damages arising from personal or sexual assault.

Can I pay off my consumer proposal early?

If you can afford to, you can finish your consumer proposal early by increasing your monthly payments or paying a lump sum. Many Canadians complete their consumer proposal early by making additional payments.

The great thing about a consumer proposal is that payments are fixed and never change, even if your income increases.

So, if you receive a pay rise, inheritance or windfall while in a consumer proposal, you can either keep it or use it to pay your consumer proposal faster.

The faster you pay off your consumer proposal, the quicker you’ll be able to improve your credit.

Can a creditor call me after a consumer proposal?

If creditors are still contacting you after filing a consumer proposal, ask them to stop and let your trustee know so they can contact the creditor.

If you have finished your proposal, sending your Certificate of Full Performance to the creditor is a good idea to prove that you completed the process.

Does a consumer proposal ruin your credit?

It’s important to note that if you are undertaking a consumer proposal, you cannot keep up with your debt repayments or have debts in collections.

Therefore, a consumer proposal probably won’t cause any further significant damage because these actions have already impacted your credit score.

While a consumer proposal appears on your credit report for a minimum of three years, it won’t damage your credit forever. You’ll find that it allows you to get your financial life in better shape faster.

Getting credit after a consumer proposal

After filing your consumer proposal, you can start taking positive steps to rebuild your credit rating.

Most Canadians obtain credit within a year of filing a consumer proposal, but interest rates may be higher. In the meantime, consider applying for a secured credit card instead.

Mortgages

You will not be eligible for prime credit, such as a mortgage, for the first two years after finishing your consumer proposal. Lenders want to see a good credit history over two years from the completion of your proposal.

Add at least two lines of credit worth $2000 each to rebuild your credit. Manage them responsibly for two years and try to use less than 30% of your available credit.

Car loans

It is possible to get a car loan during a consumer proposal. Many auto dealerships in Canada have finance tailored specifically for people in a proposal who are rebuilding their credit.

Wrapping up

A consumer proposal is relatively simple, and you can complete it as quickly as your finances allow.

Then, once you have made the required payments, you are eligible for discharge, and you will receive a Certificate of Full Performance to confirm that you have completed it.

While your credit score may take some time to rebound, it is more important that you have resolved your outstanding debts. Having a good credit score is not as important as being financially stable, so focus on getting your finances in order, and your credit score will eventually follow suit.

If you are interested in a consumer proposal, talk with a Licensed Insolvency Trustee, who will explain the options available to you and help you find a solution to your debts.