Having filed for a consumer proposal doesn’t mean you have to go without a car loan or a credit card for the rest of your life. It does, however, imply a new start, free of crippling debt obligations.

Whether you’re looking at personal debt solutions or are in the process of a consumer proposal, you’re probably curious about what happens after it’s finished. Your financial freedom is in your control after you’ve paid off your creditors. In today’s post, we will describe what happens once your consumer proposal is completed, as well as what you should do to make the most of your debt-free opportunity.

What is a Consumer Proposal?

A consumer proposal is a debt management option that allows you to pay only what you can afford to your creditors. It has a fixed payback plan that might last up to 5 years.

You cease paying your unsecured creditors once you file a consumer proposal. Creditors can no longer carry out collection calls, sue you, or take your salary to recover debts mentioned in your proposal.

What Happens When You’ve Completed Your Proposal?

You will obtain a Certificate of Full Performance if your consumer proposal is fully performed. This certificate verifies that you have followed through on your promises, with all obligations fulfilled. You are no longer obligated to make payments to any creditors that are listed in the proposal because your debts have been discharged. 

The trustee will make the final distribution of funds to your creditors when you have completed your proposal. You will also receive a detailed Statement of Receipts and Disbursements, which includes a list of the amounts received by each creditor.

Creditor’s Calls

Creditors will no longer be able to pursue you for debts covered by your consumer proposal. If Creditors keep calling, do these:

• Inform them that your consumer proposal has been fully performed.
• Send your Certificate of Full Performance if necessary.
• Inform them that they are no longer permitted to contact you.

Does A Consumer Proposal Affect Your Credit Score

Your credit score will drop after you file, but this is a vital step towards debt relief, and the harm to your credit score will be temporary. If you do get a credit card in the course of a consumer proposal and pay on time, you should see a slight improvement in your credit score.  You are able to obtain a secured credit card that will help to increase your score over time.

The Department of the Superintendent of Bankruptcy reports the credit bureaus of finished consumer proposals, along with the completion date. To ensure that your credit record has been updated correctly, check your TransUnion and Equifax credit report a month following the end of your consumer proposal. This is significant since notifying the bureau about the completion of your consumer proposal can boost your credit score by 40 to 55 points.

A consumer proposal will be erased from your credit record six years after it is filed or three years after it is completed, whichever comes first.

Getting Back on Your Feet After a Consumer Proposal?

A consumer proposal has a maximum time limit of five years. Many individuals, however, reduce this term by using one of the following methods:

• Making a lump-sum payment.
• Increasing the monthly payment, which would reduce the term.
• Making extra payments during the proposal and paying it off early.

After a consumer proposal, there are several stages of recovery.

If you are drowning in debt payments, missing payments and don’t know what to do, filing a proposal, you will certainly begin to recover financially. With a few exceptions, a consumer proposal removes unsecured debt. As a result, submitting a consumer proposal boosts your cash flow. That means you’ll have more money in your pocket and less money going to repay your creditors.

In the first year of a consumer proposal, most people find it easy to keep pace with living expenses, vehicle loan payments, and even start putting money aside.

While your credit score will initially decline after filing a consumer proposal, it will gradually improve while you are still in the process. Having a credit card and making on-time payments during your proposal will help you enhance your credit score. When you acquire the Certificate of Full Performance, your score will also rise, which is why it’s essential to finish your consumer proposal payments on time.

As previously stated, a consumer proposal is completely removed from your credit report six years after it was submitted. Your proposal will not affect your credit rating at that point. You do not, however, have to wait until the consumer proposal is erased off your credit report before you start rebuilding your credit.

Rebuilding Your Credit After A Consumer Proposal

You’ll want to start the process of rebuilding credit while you recover your finances. This may take a while, but not for long. Most people in a consumer proposal can get a credit card during the first year of filing. Some lenders will issue a car loan to those who have filed a consumer proposal, however, the interest rate will be higher at first. As long as you’ve been making on-time payments, you will be able to renew your mortgage after a consumer proposal.

Before granting a request for a new mortgage or low-interest car loan, speak with financial institutions such as banks and credit unions that would like you to have fully rebuilt your credit. Once you’ve done the following, they’ll consider you to have properly re-established your credit:

• It’s been two years since you finished your proposal.
• A minimum of two new credit or tradelines have been acquired.
• Each account has a credit limit of at least $3,000.

After Completing Your Consumer Proposal, There are a Few Things You Should Do:

1. Keep your Certificate of Full Performance for three years after the end of your proposal, or until it is erased from your credit report, even if it’s in digital form.
2. Get a copy of your credit report from Equifax and TransUnion one month after your proposal is finalized. Check that your completion date is correct, and that any other issues, such as improper late payments, are corrected. You must submit a Credit Investigation Request Form to the credit bureau to fix any error.
3. Only take out credit you can afford to pay back based on your current financial situation. Taking efforts to make sure you will not overspend in the future is a crucial component of a consumer proposal. Too many new credits can make you feel compelled to spend money you don’t have.
4. Keep track of your bills and pay them on time. Ensure that you don’t miss a payment deadline. Your credit score will be harmed even more if you make late or missed payments.
5. Credit cards have the most influence on your credit score. They show that you know how to handle revolving credit. If you are not eligible for an unsecured credit card at first, try a secured credit card.
6. Don’t apply for several credit cards at the same time, and gradually boost your credit limits. Each time you order a credit card or loan, your credit score drops a little.
7. Pay off your credit cards more frequently than once a month. This keeps your finances in check. Your rating will improve faster if your utilization rate is lower.
8. Pay attention to your financial health rather than your credit score. Your aim should be to get enough money to cover your living expenses while also allowing you to set some savings goals for the future. Credit can be used in achieving your objectives, but it must be managed responsibly.

Conclusion

If you are in debt, you may benefit from a debt solution like a consumer proposal. There is financial freedom with a consumer proposal, as stated. All you have to do is use the tips we have given you. If you’d like more information and guidance on how a consumer proposal can help you get out of debt, please contact us. We have debt experts that would counsel and guide you on your debt-free journey.