Wednesday, 12 August 2015

Does a Consumer Proposal in Canada Stay on Your Credit for 7 Years?

Many people choose a consumer proposal in Canada to get finances back on track. These represent a great debt relief option because you can settle your debt, often reduce the total balance to be repaid, freeze interest and consolidate the various monthly bills into one single, monthly payment.

Of course, as with any debt relief solution, there are implications for your credit, and we are often asked what those implications are. Many individuals come to us with a fear that a consumer proposal will ruin their credit for the long term, and leave happy knowing that this isn’t actually the case. Often the pros far outweigh the cons, especially when you consider the fact that your credit is likely already not so stellar - coupled with the fact that a CP can save you thousands of dollars and stop self-serving creditors from continually harassing you.

When it comes to consumer proposals, by far the question asked most often is “how long does it stay on my credit report?” The answer is fairly simple, but the length of time really depends of you. Many think that a CP is just like a bankruptcy - on your credit report for 6 years following the date of discharge - but this is not the case.

In a nutshell, a proposal is on your credit for 3 years from the date it is paid off in full. The faster you pay off the proposal, the faster it is off your credit report.

Here is a handy chart to help show you how to calculate how long a CP will be on your credit:

Paid of immediately
On your credit report for 3 years overall
Paid off one year after filing
On your credit report for 4 years overall
Paid off two years after filing
On your credit report for 5 years overall
Paid off three years after filing
On your credit report for 6 years overall
Paid off four years after filing
On your credit report for 7 years overall
Paid off five years after filing
On your credit report for 8 years overall

A consumer proposal in Canada is not like bankruptcy where you have an ongoing obligation to your trustee pending a discharge. Once creditors agree to a proposal, it is binding and can be paid off at any time. Or, you can choose larger monthly payments to get it paid off faster - the choice is up to you and your own personal situation.
Once you have negotiated a proposal and it has been accepted, start rebuilding your credit quickly with a secured credit card. This will help you establish good credit behaviour and show future lenders that you are committed to getting back on track.
Also, make sure that you stay on top of your credit report. Ensure that the credit reporting agencies are aware that you have filed, and also that it has later been paid off - don’t just assume that they have been made aware. Consider sending letters of discharge through registered mail.
Rather than being a credit rating killer, a consumer proposal is actually a great way to begin the process of getting your credit rating back on track. By consolidating all payments and reducing principal, you can get back on your feet, and don’t have to worry about long term impacts.


For more about filing a consumer proposal in Canada, or to discuss other options for debt relief, call DebtCare Canada today at 1-888-890-0888.

1 comment:

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