Credit Card During A Consumer Proposal

Holding onto a Credit Card During a Consumer Proposal: Is It Possible?

Debt is an unavoidable aspect of life for many people. Occasionally, it can reach levels that are too overwhelming to handle independently. In such instances, a consumer proposal might come into play. However, one question that often arises is whether you can keep a credit card during a consumer proposal. This article delves into this subject, offering insightful guidance on the matter.

What is a Consumer Proposal?

A consumer proposal is a legal agreement established between you and your creditors. It is facilitated by a licensed insolvency trustee to negotiate payment terms that you can manage. It can involve adjusting the total amount owed or even writing off a portion of the debt. Creditors often agree to such terms, as it ensures they recover at least a part of the money borrowed.

Impact of a Consumer Proposal on Credit Report

Submitting a consumer proposal isn’t without its drawbacks. Your credit report will likely take a substantial hit, which sparks several questions. Would you be able to borrow more money if the need arises? Can you hold onto any existing credit cards or credit lines? What is the precise impact on your credit score? These are all valid concerns to address.

Perks and Pitfalls of a Consumer Proposal

Several reasons justify why individuals opt to file a consumer proposal. You can eliminate your debt in 60 payments or fewer. It aids in evading or resolving collections and safeguards your assets, unlike bankruptcy. With a consumer proposal, your payments remain fixed, regardless of changes in your financial situation.

However, there are also negatives to consider:

  1. A consumer proposal negatively impacts your credit. This can make it challenging to get more credit lines, but credit scores can also be improved.
  2. It can be costlier than other debt relief options. It’s best to consider alternatives like credit counseling sessions and a debt management plan before opting for a consumer proposal.
  3. It is legally binding. If you default on a consumer proposal, you will reassume your debt without a refund.
  4. There is a limit on how much debt you can include in a consumer proposal. The minimum is $1000, and the maximum is $250,000 for an individual and $500,000 for a couple.

Consumer Proposals and Credit Score

The effect of consumer proposals on your credit rating mirrors that of bankruptcy. Having an active consumer proposal on your credit report can reduce your credit rating to R7, similar to bankruptcy, which subsequently lowers your credit score. Once the consumer proposal is complete, it remains on your credit report for 3 to 7 years before it falls off.

Can You Obtain Credit in a Consumer Proposal?

If you need to acquire more credit while in a consumer proposal, remember that it could be extremely difficult to secure approval due to two main factors:

  1. Your credit score has been damaged. Your credit score reflects your ability to handle debt and your reliability in making payments.
  2. Your debt could return. Because you are still actively in a consumer proposal, lenders see this as a significant risk. Until the consumer proposal is complete, you are at risk of defaulting on it, meaning that all of your debt could return.

Keeping a Credit Card in a Consumer Proposal

One effective way to improve your credit score while in a consumer proposal is to have positive tradelines on your credit report. This can be achieved with a credit card. Many are unaware that if you’re in a consumer proposal, you are allowed to keep a credit card.

Securing a Credit Card

Since your credit score may be lower due to your consumer proposal, your credit card options may be limited. An unsecured credit card is typically more challenging to acquire in this situation, making a secured credit card your best bet.

Rebuilding Credit After a Consumer Proposal

Once you complete your consumer proposal, it’s still going to be quite challenging to rebuild your credit score. This is where a secured credit card or a credit-building loan can come in handy. These products reflect positively on your credit report as you make your monthly payments.

How Can Credit Counseling Services Help?

Credit counseling services offer personal loans for all credit types. All of their products report to the credit bureaus, allowing you to increase your credit score by building a positive credit history.


Filing a consumer proposal can give you the fresh financial start you need to begin rebuilding your credit again. While credit cards offer convenience, when not used responsibly, they can also negatively impact your credit score. Therefore, it’s crucial to make this decision and know all the facts. Speak with a credit counselor or debt expert to provide expert advice customized to your financial situation.

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