How Does a Consumer Proposal Affect My Credit Rating? (2024)

FAQs

How Does a Consumer Proposal Affect My Credit Rating? ›

A consumer proposal will stay on your credit report for 3 years after you've finished paying it off. If you are able to finish paying off your consumer proposal in 3 years, the R7 rating will stay on your credit report for a total of 6 years. This being the case it makes sense to pay it off as quickly as possible.

A consumer proposal will affect your credit rating, but less drastically than a Bankruptcy. While both options make it less likely that you will be able to obtain credit a Consumer Proposal will only stay on your record for three years after your last payment.

A Consumer Proposal allows you to make a legal arrangement with your creditors wherein you'll only have to repay a portion of your debts – in full settlement – with no interest, fees or additional penalties. In fact, it's not uncommon for debts to be reduced by 70-80%!

Consumer proposals are usually accepted as filed and negotiations can take place between you and your creditors with the help of your Licensed Insolvency Trustee to gain a positive vote.

In other words, the maximum length of time a consumer proposal will affect your credit report is 6 years. So, for example, if your consumer proposal takes you four years to pay off, your score will be affected for 6 years in total (as 6 years is less than 4 years plus 3 years).

Disadvantages of a Consumer Proposal:

A proposal will usually take longer to complete than a bankruptcy. Lowering your monthly payment means longer time paying back, however, if your situation improves, you CAN pay off a proposal early. Credit rating is still affected – A Consumer Proposal DOES affect your credit.

A consumer proposal filing makes good sense if you have a large amount of unsecured debt and a stable monthly income. If you can still repay at least 25% of your total debt over a five-year period, it's likely that creditors will accept a consumer proposal to avoid losing the entire loan balance in a bankruptcy.

After paying off debt you consolidated in a Consumer Proposal, or having your debt forgiven under personal bankruptcy, you can get a new mortgage, vehicle financing, credit card, bank loan, etc. In as little as two to three years you may even have a better credit rating than before you started!

If you pay your proposal off sooner than agreed upon, you will speed up your credit recovery.

When you have an ongoing consumer proposal, and 3 years after it's fully paid off, you will have an R7 rating on your report. It might affect your ability to get a new loan or credit. A common approach to show reliability is to get a secured credit card, which you pay in full and on time every month.

Do you have to give up all credit cards in consumer proposal? ›

It is an important tool for rebuilding your credit during a consumer proposal, as a secured credit card is reported to the credit bureau to help rebuild your score. With a consumer proposal, it is also possible to keep any credit cards with a nil balance, but you may want to have a fresh start.

They can say 'yes' or 'no' to the proposal. If at least half of your creditors vote 'yes,' then the proposal is deemed approved. Banks have 45 days from the date you file the proposal to vote. Banks also have the option to ask for a certain amount of the debt owed to them.

Do all debts have to be included in a consumer proposal? You must include all unsecured debts when you file a consumer proposal. It is not possible to exclude one or two specific creditors. The main reason being that a proposal is a legal process that deal with all creditors fairly.

In consumer proposals, the amount you need to pay in surplus income will only be calculated at the beginning of the proposal and will remain fixed throughout the duration of it. If your income goes up or down during the proposal, the allocation does not change.

At Spergel, we have been helping Canadians to file consumer proposals for years. With a 99% acceptance rate on any consumer proposals we file, we see many Canadians reducing their debt by up to 80% with a consumer proposal. This means that when you file with Spergel, you have a 99% chance of reducing your debt by 80%.

FAQ Related to After a Consumer Proposal Is Paid Off

Once you have successfully completed and paid off the Consumer Proposal, it will be removed from your credit report three years after the completion date or six years from the filing date, whichever occurs first.

Depending on the credit reporting agency, a consumer proposal can remain on your credit report for either 3 years after you pay off all the debts included in the proposal, or 6 years after you sign the proposal, whichever is sooner.

A Consumer Proposal will be on your credit history for the lesser of: three years after your Consumer Proposal is finished – OR – six years from the date your Consumer Proposal started.

Consumer proposals

The trustee creates a proposal for your creditors where they agree to let you pay off a percentage of your debt. Equifax and TransUnion remove a consumer proposal from your credit report either: 3 years after you pay off all the debts included in the proposal, or.

While consumer proposals are becoming more common in Canada, they are not a good option for everyone. There are downsides of filing a consumer proposal: A consumer proposal will usually take longer to complete than a bankruptcy.