How Will a Consumer Proposal Impact My Credit Report?
For sure, you already have a little knowledge about the distinction of a consumer proposal over bankruptcy. Although the two debt solutions aim to free you from indebtedness, a consumer proposal can result in lesser damage to your living. Taking, for instance, the fact that bankruptcy will urge you to surrender all your assets to compensate your creditors, which is not the set up that you’ll get in a consumer proposal.
Bankruptcy will oblige you to hand over your household pieces of furniture and appliances, your vehicles, and other valuable possession, and assets which are not exempt. These assets will be handed to a licensed bankruptcy trustee who will then set up a trust t deposit such assets. The proceeds of this trust will be used to pay your creditors for the amount that you owe. It might not be your entire debt but at least a portion to which your creditor can get as debt payments. Although there are assets in exempt, losing valuable and significant assets are too much to bear for most.
Moreover, a consumer proposal will not cause you a significant amount, unlike when you’re filing for bankruptcy. Thus, before filing you must how much debt is required for a consumer proposal. However, although you are evaluated to qualify for a consumer proposal, it doesn’t mean that it can’t cause any damage on your part. A consumer proposal also impacts your credit report, which is most likely similar to how bankruptcy can. It would also be wise if you consider filing for a joint consumer proposal.
My Credit Rating in Canada
Your creditors will regularly report your account status to the major credit bureaus. Your creditor will assign a number to your debt according to your payment records and current status. This information is shared with the credit bureaus, which records the numbers in your credit report. By doing so, creditors who are trying to evaluate your creditworthiness can get a picture of your capacity to pay.
Should a Bad Credit Rating Hinder Me from Filing a Consumer Proposal?
Gaining a higher number on your credit record, jeopardize your chances of getting accepted for a credit application. It is a must that you should now the basics of a consumer proposal before making a decision. This also includes a slim chance for an extension of your loan. Moreover, if you’re approved, the possibilities of getting a lower interest rate are also difficult. Your creditor will rate your report R1 if you’re up to date with your payment. In contrast, you will get an R9, which implies that you’re bankrupt; creditors or lenders mostly turns down your application. In some cases, huge interest rates will be in place, if for instance you get accepted.
However, there’s always a chance for you to get back on track towards financial stability. Although bankruptcy remains on your report for long, you can restore your credit repute by being diligent in your obligation. By doing so, creditors will likely to offer or grant your application. On the other hand, a consumer proposal will give an R7 rating in your credit report. This rating is just a few points lower than in bankruptcy (R9); hence, a consumer proposal will also impact your credit report severely.
Furthermore, the rating that you can acquire in a consumer proposal will remain, unless you’ve paid your entire debt. Besides, paying your obligations in full in a consumer proposal will take approximately 3 years or more to be cleared off. You must also know how to avoid a consumer proposal annulment. Also, the maximum duration of a consumer proposal is 5 years. For instance, wherein your proposal runs a 4 years duration, plus the 3 years minimum for the record to remain in your report, it will sum up to a total of 7 years.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.