Is There Life After a Consumer Proposal?
The end goal of entering into a consumer proposal contract is to pay off what you owe and earn your Certificate of Full Performance.
This is a piece of documentation that will be authorised by your proposal trustee and will demonstrate that you have completed the full consumer proposal process.
This document is then sent to the government and major credit unions to let them know your status.
Therefore allowing you to begin building up your credit rating against after getting out of debt.
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What is a consumer proposal, and why should I choose this option?
Before we get into the details of what you can expect once you have completed a consumer proposal, it’s important to briefly define both what it is and what it isn’t.
For example, a consumer proposal is not the same as bankruptcy.
In fact, a consumer proposal is often a much more sensible option because it offers debt forgiveness at a much-reduced rate.
However, it is essential to note that consumer proposals do not look the same for everyone.
In fact, the amount of each dollar that you owe that you will be required to pay back will differ depending on each individual case.
You will also be expected to make consumer proposal payments each month, up to a duration of 5 years.
Fortunately, even though the exact terms can vary, they are usually manageable for the individual in debt.
That means it is still often a much more generous option than traditional bankruptcy, as well as debt conciliation and credit counselling.
This is why it is a debt solution endorsed by the Canadian Government.
How do I complete my proposal?
You will be classed as having completed your proposal by making your payments on time for the prescribed duration.
However, it is crucial to understand that you will have other responsibilities to attend to complete this process.
The first of these is that you will need to stay in contact with the organisation (known as the trustee) that provides you with this debt settlement.
This will include notifying them of changes in your contact details such as an address, phone number, and even when you get a new job.
The second duty is not just essential because it will lead to your consumer proposal compilation.
It is also crucial because it can be valuable for your own future financial well being as well.
The reason for this is that the second duty that you will be required to complete is going to two sessions that teach you the basics of finance management.
In fact, in these counselling sessions, you can expect to learn critical money management skills.
Such as budgeting, as well as how to rebuild your credit once your consumer proposal has ended.
The latter being a topic; we will go into more detail below.
Remember, even if you complete all of your payments, you cannot complete your proposal and have it signed off if you do not carry out the steps above.
Can I pay my proposal off early?
Many people also wonder whether a consumer proposal must be paid in line with the schedule that the trustee sets, or whether it can be paid off early?
Either by increasing installments or by paying it off in a single lump sum.
The good news here is that it is entirely possible to pay off your consumer proposal early.
In fact, because there are no penalties for taking this course of action, it is both common and popular.
Especially for those that find themselves with additional income from a new job role, or more effective budgeting.
Obviously, the sooner that you complete the payments for your consumer proposal, the sooner you can qualify for your Certificate of Full Performance.
This will then allow you to go about the business of repairing your credit rating and getting your finances back on track.
What happens to my credit after a consumer proposal?
One of the most asked questions about consumer proposals is what effect it has on an individual’s credit rating.
That is, will it affect the individual’s ability to be granted credit in the form of loans and credit cards.
However, to answer this, we must first outline what happens to your credit during the consumer proposal.
When you accept a consumer proposal, your credit rating will drop to the lowest level.
Now, this often sounds a bit terrifying!
However, if you find yourself in a position where you need a consumer proposal, it’s improbable that your credit rating will be healthy anyway.
Therefore, whether you take the consumer proposal or not, it’s unlikely that you will qualify for traditional unsecured credit.
Although if you do take the consumer proposal, once it is completed, you can begin to rebuild your score.
In fact, the good news is that taking a consumer proposal will only have a temporary effect on your credit rating.
This will likely last for the duration of the consumer proposal, as well as an additional three years.
The reason being that there will be a note placed on your credit record for three years after you have received your Certificate of Full Performance.
However, even during this three-year post-consumer proposal period, it is viable to begin rebuilding your credit score.
Therefore allowing you to get back on the path to achieving your larger financial goal such as buying a home, or starting up a business.
One of the tactics you can use to do this is to begin by taking out a secured credit card.
This type of card will function in the same way that any other credit card will.
However, you will need to put down a deposit to be given the go-ahead.
The good news is that this makes it much easier for those with a less than perfect credit rating to be approved.
Once you have a secured card or loan, you will then be able to demonstrate that you can be relied on to make payments punctually.
Something that, over time, should positively impact your credit score.
In fact, ‘over time’ is the critical thing to remember here.
This is because repairing your credit score is never a fast process.
However, for those that require debt repair, completing a consumer proposal is often the best option.
This is because it will allow them to make moves to boost their credit in a less financially burdensome manner than other debt repair options on the market.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal