Consumer proposals are a popular solution for many individuals facing significant debt. But what happens after a consumer proposal is accepted? Here’s what you need to know.
Consumer Proposal Completion
When a consumer proposal gets accepted, it’s not the end of the journey. There are still responsibilities to fulfill. Once you’ve met the conditions set forth by your creditors in your consumer proposal, you’ll receive a Certificate of Full Performance. This document officially frees you from the obligation to repay the remaining balance of your debts involved in the consumer proposal.
Your Licensed Insolvency Trustee (also known as a proposal administrator) will also receive a discharge from the consumer proposal process once they have fulfilled their legal requirements. These include:
- Reviewing and admitting creditor claims.
- Preparing a final accounting of all moneys received in the consumer proposal.
- Distributing the final payments (dividends) to eligible creditors.
Importance of Keeping Consumer Proposal Documents
Given that a consumer proposal is a legal debt settlement, you will receive several documents throughout the process. It’s crucial to keep these documents for your records. Some of them include:
- Notice of Consumer Proposal: This document indicates the official start date of your consumer proposal, the settlement offer you proposed to your creditors, and a list of your creditors.
- Certificate of Full Performance: This certificate marks the completion of your consumer proposal, signifying that your creditors can no longer ask you to make payments since those debts have been settled through the proposal.
- Final Statement of Receipts and Disbursements: This is the final document you’ll receive in the consumer proposal process. It contains key dates, a finalized list of the creditors involved in the consumer proposal, and how much money each received.
In case you lose these documents, you can obtain copies by contacting your Trustee directly or reaching out to the Office of the Superintendent of Bankruptcy.
Credit History and Score after a Consumer Proposal
A consumer proposal will reflect on your credit history report for three years after the date you finish your consumer proposal or six years from the date your consumer proposal started, whichever comes first. However, you don’t have to wait for this period to pass before you start improving your credit history and score.
Once your consumer proposal is completed, you can start taking steps to improve your credit report. These may include:
- Getting copies of your credit reports from both Equifax and TransUnion of Canada and checking them for errors
- Paying all your bills on time consistently
- Getting new credit and using it responsibly
Getting Credit after a Consumer Proposal
Although it’s possible to get new credit immediately after (and even during) your consumer proposal, you should be satisfied with the terms of borrowing. Here’s a rough timeline of when you might expect to get new credit:
- Mortgage: Standard lenders may grant you a new mortgage two years after you finish your consumer proposal.
- Car Loan: Mainstream lenders may grant you a vehicle loan or lease within a year or two of finishing your consumer proposal.
- Credit Card: Many people obtain a secured credit card before their consumer proposal is finished.
However, besides your credit score, lenders will also evaluate your income and savings when considering your credit application.
Final Thoughts
The journey doesn’t end once a consumer proposal is accepted. Navigating through the completion and aftermath of a consumer proposal can be overwhelming, but with the right guidance and diligence, you can emerge with a clean slate and a better understanding of managing your financial health.
If you’re considering a consumer proposal but are concerned about its impact on your credit, remember that high credit balances or a stretched budget due to current debts can prevent lenders from approving you even if your credit score is high. A consumer proposal may be a necessary step forward to enable you to get future credit and at the best available rates.
For a comprehensive understanding of consumer proposals and other debt solutions, consider booking a free debt consultation.
