Can I keep a credit card during consumer proposal?

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Considering a consumer proposal in Canada? Say goodbye to your current credit cards, as you’ll need to hand them to your Insolvency Trustee. However, a zero-balance unsecured card might stay. Prepaid and secured cards are fine for managing finances. Expect a credit score dip, but bounce back by making prompt payments and using secured cards wisely.

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Credit Card Question

Can I keep a credit card during consumer proposal? I want to know if it’s possible to keep using a credit card while I’m in a consumer proposal.

From: Anonymous Question
Location: Barrie, Ontario (ON)
Category: consumer proposal

Credit Card Answer

When you’re considering a consumer proposal in Canada, keeping your current credit cards typically isn’t an option. You’ll need to hand them over to your Licensed Insolvency Trustee. Yet, there’s a glimmer of hope: if your unsecured credit card has a zero balance, you might keep it, depending on agreements with the creditor and Trustee. Meanwhile, prepaid or secured cards are still fair game. They aren’t tied to a traditional credit line, making them a handy tool for juggling your finances during the proposal period.

Here’s what you need to know about your credit score: it’ll take a hit with this move. Expect R7 or I7 notations on your credit report. But hey, don’t worry too much. You can bounce back after your proposal by keeping up with payments and smartly using a secured credit card. Just know that snagging new credit cards during this time can be a bit tricky thanks to the dip in your credit score. So, it’s essential to be wise with the credit you have or any new options that come your way.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

Under a consumer proposal in Canada, you are typically required to stop using unsecured credit, including credit cards. Once you file a consumer proposal, your creditors cannot pursue collections on the debts included in the proposal, and therefore, using any unsecured credit, like a credit card, is generally not permitted. Additionally, Section 66.33 of the Bankruptcy and Insolvency Act states that debtors must comply with the terms set forth by the proposal, which typically prohibits incurring new debt without the trustee’s consent.

If you wish to keep a credit card, you may need to inform your trustee and seek their advice, as any new credit can complicate your proposal and its acceptance by creditors.

From: OSB Helper

Related Questions to Consumer Proposal

Here are the top 5 most frequently asked questions related to keeping a credit card during a consumer proposal, based on common concerns and search trends:

1. Can I keep my existing credit cards during a consumer proposal?

• No, you will need to surrender any credit cards covered by the proposal.

2. Can I obtain a new credit card while in a consumer proposal?

• Yes, but it may be challenging, and new credit cards will likely have lower credit limits and higher interest rates.

3. How does a consumer proposal affect my ability to use credit cards?

• You should avoid using credit cards included in the proposal, as continued use could be considered fraudulent.

4. What are the credit limit and interest rate implications for new credit cards during a consumer proposal?

• New credit cards will likely have lower credit limits and higher interest rates.

5. How should I manage my credit card use during a consumer proposal to avoid new debt?

• Use credit cards only for essential expenses such as groceries, utilities, or medical expenses, and avoid non-essential spending[1].

If you have a question about debt see our debt questions or ask your own debt related question.

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