What Are My Debt Options if I’ve Done a Consumer Proposal Before?

Exploring Debt Alternatives After Having Previously Filed a Consumer Proposal

Understanding that one is engulfed by a debt crisis can be an arduous realization. It can be even more daunting when you have previously grappled with debt issues. However, it is essential to understand that you are not alone in this struggle, and there exist numerous options to help you address your debt and pursue a healthier financial future. This holds true even if you have previously opted for a Consumer Proposal or bankruptcy.

If you have before utilized and successfully concluded a Consumer Proposal, or personal bankruptcy, it does not restrict you from leveraging a Consumer Proposal to manage your debt. This article delves into the options for Consumer Proposal debt consolidation and forgiveness if you’ve collaborated with a Licensed Insolvency Trustee in the past.

Considering a Second Consumer Proposal in Canada

No matter if you have filed a Consumer Proposal before, or have previously declared personal bankruptcy, a Consumer Proposal can be an effective debt resolution strategy to help you overcome your current debt issues.

You are not obliged to collaborate with the same Licensed Insolvency Trustee as before, and initiating a Consumer Proposal will follow more or less the same procedure every time, even if you’ve previously completed a Consumer Proposal or bankruptcy:

 

A Consumer Proposal arises as a unique legal alternative to consolidate debt without resorting to borrowing, providing individuals the flexibility to reduce their total debt to an amount they can afford to repay.

Debt reductions of up to 50-80% are typical, over a duration of up to 60 months.

If at least 50% of your creditors (by dollar value) consent to your offer, your Consumer Proposal will be legally binding on all your creditors, even those who may not have voted to accept your offer.

Virtually all categories of debt (including government and Canada Revenue Agency debt) can be consolidated and significantly reduced through a Consumer Proposal.

How Often Can You Opt for a Consumer Proposal?

There is no restriction on the number of times an individual can file a Consumer Proposal, and there is no penalty in subsequent Proposals for having completed a previous Consumer Proposal.

Government creditors such as the Canada Revenue Agency may expect a higher offer of repayment in subsequent Consumer Proposals if they are a creditor from whom you have consistently sought debt forgiveness through multiple insolvencies. Nevertheless, the reduced balance and protection a Consumer Proposal offers could still provide substantial benefits compared to repaying the debt in full, along with ongoing interest and other charges. A Consumer Proposal is one of only two legal Debt Solutions for Having Government Debts Forgiven.

Additional Costs for Filing a Second Consumer Proposal?

Absolutely not! No additional fees are added to what you are offering to your creditors in your Consumer Proposal, even if you’ve done a Consumer Proposal or bankruptcy before.

Licensed Insolvency Trustee fees in all Consumer Proposals are determined by government tariff, and are deducted from the funds creditors receive, ensuring they are covered at no extra cost to you, the individual.

Implications of a Second Consumer Proposal on Credit History

A subsequent Consumer Proposal will impact your credit history the same way as the first Consumer Proposal. You can expect Consumer Proposals to show as an ‘R7’ on your credit history report for three years after completing your Consumer Proposal, or six years from the date you filed your Consumer Proposal – whichever comes first.

Your credit history and score are continually evolving, and most people could expect to qualify for mainstream credit products within a year or two of completing a Consumer Proposal, if not earlier.

Modifying an Active Consumer Proposal

If you’ve accrued new debts since your original Consumer Proposal was filed or there’s been an unforeseen change in your circumstances, reach out to your Licensed Insolvency Trustee for advice if you’re facing renewed financial challenges.

You can file a Consumer Proposal more than once, but you can’t have multiple active Consumer Proposals concurrently. Depending on the situation, there may be several ways we can assist you to regain your financial stability, for instance:

 

If you currently have an active unfinished Consumer Proposal but your situation has changed and your ability to finish your Consumer Proposal is being impacted, it may be suitable to consider amending your existing Consumer Proposal to make the terms more appropriate to your changed circumstances.

Alternatively, some people might choose to abandon an ongoing Consumer Proposal to ‘re-file’ a new Consumer Proposal or declare bankruptcy, although this is less common.

If your incomplete Consumer Proposal was annulled due to missed payments, it may be possible to simply revive (restart) your Consumer Proposal.

Regardless of all the best intentions, financial difficulties can occur – and a debt issue can arise even to those who’ve previously worked diligently to become debt-free. In fact, 22% of Canadian consumers who made a Consumer Proposal or declared bankruptcy in 2019 had previously filed for bankruptcy according to the 2019 Canadian Consumer Debtor Profile.

We urge you to bring any concerns to your Licensed Insolvency Trustee. We’re here for you throughout the process and want to help you achieve your debt-free goals. The sooner we can collaborate, the more options you may have – and with the least stress possible to you.

Debt Red Flags to Be Aware Of

Confronting signs that debt is spiraling out of control can be challenging. Especially if you’ve dealt with a debt problem in the past, it’s crucial to understand that you may have been in a completely different situation, so the indicators of problem debt may not appear the same. Stay vigilant for signs such as:

 

  • Excessive stress, or constantly worrying about your debt.
  • Only being able to make minimum monthly payments on your debt (especially credit cards).
  • Depending on credit to bridge gaps in income and to meet living expenses.
  • Amassing more debt or stagnating balances even though you’re making payments.
  • Using credit to shuffle money for payments, or turning to family or friends to borrow funds to pay.
  • Considering (or being refused) for a debt consolidation loan.
  • Ignoring your account balances, creditors, or downplaying the situation to your spouse or partner.
  • Threats of (or already happening) collections, court actions, or wage or account seizures.

 

If you suspect you might be facing a debt problem – you likely are, and although it may seem impossible, every single debt problem has a solution!

You don’t have to evaluate your options and the pros and cons in isolation. Connect with a qualified debt expert – a local Licensed Insolvency Trustee, for a free and confidential assessment and consultation where we’ll explain and help you consider all your options, including (but not necessarily limited to):

 

  • Informal debt management solutions like self-directed negotiations, credit counselling debt management plans, and more.
  • Formal debt management solutions such as legal debt consolidation with a Consumer Proposal or filing personal bankruptcy.

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