When you file a consumer proposal, you enter a legal process. The terms of your proposal will detail the payments that you are required to make as well as the length of the proposal. Once you have completed these payments and fulfilled all duties associated with your consumer proposal, you will receive a Certificate of Full Performance signed by your trustee. You will then forward a copy of this certificate to the two major credit bureaus (TransUnion and Equifax) in order to let them know that your proposal is complete. However, the credit bureaus will likely also be notified by the government.
Completing your Proposal
In addition to making the agreed-upon payments, there are other duties associated with a consumer proposal. These duties must be completed in order to finish the proposal. These duties include:
- Attending two financial counselling sessions. These sessions are designed to help you learn budgeting and money management techniques in order to avoid financial issues in the future. You will also learn how to rebuild your credit rating after consumer proposal.
- Providing your trustee with updated contact information. If you move, change jobs or change your phone number (such as if you get a new cell phone) you will need to update your trustee with this information.
- You will also need to work with your trustee and adhere to any other conditions that are outlined in the proposal.
If you complete your payments and the other duties associated with your proposal, your trustee will be able to sign your Certificate of Full Performance once your proposal has been paid.
Paying your Proposal Early
You do not have to wait until the timeframe listed in your proposal to complete the proposal payments. If you have the funds available, you can pay your proposal more quickly. Doing so will allow you to receive your Certificate of Full Performance earlier and get started with rebuilding your credit rating. If you are financially able to, you can increase your monthly payments or pay a lump sum in order to finish your proposal earlier. There are no penalties for doing so and no interest is charged. In fact, paying a proposal early is the ideal situation and is welcomed. If you get a raise, change jobs and receive a higher salary or receive a lump sum of money for any reason, you can use this money to pay your proposal. Surplus income is not taken into account once the proposal is filed.
Your Credit After Consumer Proposal
Many people have concerns as to how their credit report will be affected by filing a consumer proposal. However, in reality, if you are in a position where you are having difficulty meeting your financial commitments and where filing a consumer proposal makes sense for you, you have likely already done damage to your credit rating. A consumer proposal does not ruin your credit rating forever. In fact, it puts you in a position where repairing your credit is possible. After a consumer proposal, there will be a note on your credit report for three years. However, you are still able to improve your credit score during this time. One of the most important factors that is used to calculate a credit score is your payment history. Showing the credit bureaus that you are able to borrow money and successfully pay it back will improve your credit. It makes sense to start small. After your consumer proposal has been completed, take out a small loan or apply for a credit card. You may wish to choose a secured credit card (where you put down a deposit for as long as you hold the card which will become your credit limit) since this will likely be easier for you to get. Then it’s up to you to make payments on this card and pay your bills on time. A prepaid card does not affect your credit rating in any way. It’s important that you remember that rebuilding credit after consumer proposal takes time. It is not an instant process. Avoid companies that promise to be able to “fix” your credit report automatically. No one can change the information that is listed in your credit report. The only way to repair bad credit is by following good credit processes over time. After a consumer proposal, you will need to show that you can borrow money responsibly. Showing this will allow you to rebuild your credit score.