How bad is a consumer proposal?

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Managing your finances isn’t as scary as it seems. A consumer proposal can simplify your debt by rolling payments into a single monthly sum and protecting assets like your home. While it may impact your credit score, it’s less severe than bankruptcy. Stay on track with payments to avoid creditor calls.

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Consumer Proposal Question

How bad is a consumer proposal? I’m worried about the impact of a consumer proposal. How does it affect my finances and credit score?

From: Anonymous Question
Location: White Rock, British Columbia (BC)
Category: consumer proposal

Consumer Proposal Answer

Managing your finances might sound daunting, but let’s break it down. Imagine a consumer proposal as a lifeline when you’re swimming in unsecured debt. It’s not all sunshine, though; your credit score might take a hit, but it’s softer than the blow you’d face with a personal bankruptcy. This proposal tags along with your credit report, sticking around until you’ve wrapped it up and hanging on for a few years after. It’s like that party guest that lingers a bit too long, but thankfully, it won’t stay forever.

On the brighter side, a consumer proposal offers you a way to reel in your finances. Picture this: rolling your payments into a single, more manageable monthly sum. You pay only a portion of your debt, giving you a clearer path over the next five years.

Now, let’s talk about what you get to keep—like those precious assets of yours, including your home. Plus, it throws a wrench into those pesky creditor calls. But beware, missing three payments, and it’s back to square one, with creditors knocking again with the original terms.

And yes, there are some costs linked to getting this proposal started, such as administration and counseling fees. But don’t fret—they’re usually baked right into your repayment plan. So, while it might not solve everything at once, a consumer proposal can be a friend when you’re maneuvering through a financial jungle.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

A consumer proposal can have significant implications for your finances and credit score.

When you file a consumer proposal, it allows you to offer your creditors a settlement for less than what you owe, which can resolve your debts and stop collection actions. However, the proposal is registered with the Office of the Superintendent of Bankruptcy, and this will remain on your credit report for three years after you complete the proposal, potentially impacting your ability to obtain credit during that time (see BIA, Section 66.13).

In terms of your credit score, a consumer proposal is considered a negative factor and can lower your score (C.R.C., c. 368, Section 4). This may result in higher interest rates on future loans or difficulty qualifying for credit.

It’s important to consider these effects carefully, and weigh them against the potential relief a consumer proposal may bring to your financial situation.

From: OSB Helper

Related Questions to Insolvency In Canada

Here are the top 5 most frequently asked questions related to the impact of a consumer proposal, based on common concerns and online search trends:

1. How does a consumer proposal affect my credit score?

A consumer proposal will initially lower your credit score, but the impact is temporary, and you can start rebuilding your credit score during and after the proposal[2][5].

2. Can I get new loans or credit cards with a consumer proposal on my credit report?

It is possible to get new loans or credit cards, but your options may be limited, and you may face higher interest rates or fees due to being seen as a high-risk borrower[1][2].

3. How long does a consumer proposal stay on my credit report?

A consumer proposal stays on your credit report for three years after you complete the proposal[2][3].

4. What is the difference between a consumer proposal and bankruptcy?

A consumer proposal allows you to keep more of your assets, has less of an effect on your credit score, and involves regular fixed payments, whereas bankruptcy involves surrendering assets and can stay on your record for six years[3][5].

5. How much does it cost to file a consumer proposal?

The total cost includes a filing fee, financial counselling fees, and administration fees, which can amount to over $1,700, subject to change[5].

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

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