What Happens After a Consumer Proposal?
Deciding to file a consumer proposal needs to be a careful decision, and is one that should be made after ruling out all other bankruptcy options. However, for many, it’s a clear path to starting a new financial life.
Filing a consumer proposal allows you to participate in a debt settlement that is backed by the government. This can provide a giant debt reduction, and still allow you to keep many of your assets. Navigating the best way to start over financially and rebuild credit can be difficult. It’s vitally important that you spend time discussing your future finances with a Licensed Insolvency Trustee.
Future Effects of Filing a Consumer Proposal
When you file a consumer proposal in Canada, the main advantage is that the majority of debt is consolidated. Overwhelming debt payments can be reduced and consolidated, creating one monthly, interest free payment, that is far more affordable. In addition, a stay of proceedings is put into effect, and creditors can no longer contact you. They can also no longer start lawsuits against you. This proceeding can be a clear path to a new financial future. However, there are some small impacts on this type of proposal. For example, there will be a note on your credit report that you’ve completed a consumer proposal. However, once you’ve finished the consumer proposal, your creditors will be informed. Then you can start rebuilding your overall credit score. You can work on this process by using secured credit cards regularly and paying your bills on time, as well as using one bank for your finances and building up a banking history. You can discuss the overall impact of filing this proposal with a skilled Licensed Insolvency Trustee.
Obligations During the Consumer Proposal Process
While there aren’t the same duties required as with bankruptcy, you do take on some obligations when you file a consumer proposal. You guarantee that you will make all monthly payments on time, and that you will attend two credit counseling appointments. These are to help you learn more about managing your finances. You will not be required to report your income or your expenses.
Will a Consumer Proposal Affect Any of My Assets?
One major benefit of filing a consumer proposal in Canada, instead of declaring bankruptcy, is that you get to maintain your assets. Property and vehicles are secured debts, so as long as you’re able to maintain the monthly payments, you can keep them throughout the proposal. You also get to keep any contributions you’re making towards investment accounts and savings accounts.
How Will a Consumer Proposal Impact My Credit Report?
Consumer proposals are legally supported in Canada. This means that they all are reported to the Office of the Superintendent of Bankruptcy, and also to the credit bureaus. On the date that you file a consumer proposal, a notice will be logged. This will stay on your credit report for three years once your proposal has been fully completed. After you’ve completed your proposal, it will be removed by the credit bureaus. Many individuals notice their credit score begin to improve soon after they’ve completed their consumer proposal.
How Long Does a Consumer Proposal Take?
According to Canadian law, a consumer proposal can take a maximum of five years or 60 months. This makes it possible for the debt repayment process to be spread out for the debtor over a manageable amount of time, while also ensuring reasonably affordable payments. No consumer proposal should take more than five years. You can pay off your proposal earlier or make a lump sum payment, if your financial situation improves during the term of your consumer proposal. This will shorten your overall term.
After a Consumer Proposal
Filing a consumer proposal can be the first step toward financial freedom. After you’ve paid this off, you’ll have a dramatic reduction in debt, and you’ll just need to manage your monthly payments. Because your payments are reduced overall, you may even be able to start rebuilding your credit or begin to save some money. Speak to your Licensed Insolvency Trustee about ways to begin taking the first steps toward rebuilding your credit. You may be able to eventually obtain a low interest loan or the mortgage that you need, so that you can continue to take important steps toward financial freedom.