Life After Filing a Consumer Proposal
A common misconception we often hear about filing for a consumer proposal is that once you do so your credit rating will be forever ruined, and you’ll never qualify for credit again.
Although it may be a lengthy process, it’s not impossible. There are several ways you can rebuild your credit after you’ve completed the terms offered to your creditors under your consumer proposal.
Before we break down the several ways you can effectively rebuild your credit following a consumer proposal, let’s discuss what happens once you’ve completed the terms set out in your offer.
What happens after a consumer proposal?
For a quick refresher, a consumer proposal is a formal, legally binding process administered by a Licensed Insolvency Trustee (LIT), acting as an Administrator. In this debt relief process, the Administrator works with you to develop a “proposal”: an offer to pay creditors a percentage of what is owed to them.
Once you complete your consumer proposal repayment plan, you will receive a Certificate of Full Performance. This legal release from your debts signifies that you’ve completed the terms of your consumer proposal and are officially free from the balance that was forgiven under the proposed settlement.
It’s important to note that after you’ve completed your consumer proposal, it’s reflected on your credit history for 3 years or 6 years from the date it was initiated (whichever comes first).
What happens to credit following a consumer proposal?
After filing a consumer proposal your credit score will drop. This can be frustrating but try to remember that doing so was necessary to absolve you of your unsecured debts.
This low credit score is also temporary. Below you’ll find several ways you can repair your credit over time.
Repairing your credit after a consumer proposal is completed
Get copies of credit reports
One of the first things you can do to rebuild your credit is to make sure the credit bureaus are reporting correctly. Unfortunately, this is not something a LIT can do. It’s up to you to request a free copy of your credit report from either Equifax or the TransUnion of Canada.
Once you’ve received the report, make sure everything looks up to par and your credit rating is correct. If you find any inaccuracies, report them to the credit bureaus as soon as possible as these can slow down the process of rebuilding your credit.
Get a secured credit card
It might seem counterintuitive to get a credit card after having filed a consumer proposal, but no credit is also bad credit.
Unlike unsecured credit cards, secured credit cards require you to make a deposit before you can start spending. This deposit becomes your limit and acts as collateral for your credit, allowing the bank to take money from the deposit if you miss any payments.
Since banks report to a credit bureau, any payments made on time will improve your rating.
Make agreed-upon payments on time
Making payments on time has a huge effect on your credit score. Just one missed payment can reflect poorly on your credit rating, especially if it’s 60 days past due.
One way to ensure you never miss a payment is by setting up automatic payments through your online bank.
Surviving a Consumer Proposal is possible
As you can see, there is life after a consumer proposal. It might take a while but with the right steps, rebuilding your credit is possible. If you’re looking for more information or advice related to consumer proposals or other debt relief solutions, Crawford, Smith, and Swallow can help!
To book a free consultation with our experienced team of Licensed Insolvency Trustees (LITs) visit our website.