Rebuilding credit after filing for Consumer Proposal can be an uphill struggle, but with proper strategies in place it can become much simpler and quicker.
Consumer Proposals are a way of restructuring debt so it becomes more manageable. Once paid in full, a certificate of completion should be sent immediately to credit bureaus for review.
Funding options after consumer proposal include debt consolidation, secured and unsecured loans, and obtaining a co-signer with good credit. Additionally, applying for government grants and scholarships can be a great way to help pay off remaining debts, as well as building up maximum cash reserves for emergencies.
1. Negotiate With Your Creditors
Consumer Proposals are an alternative to bankruptcy that allow individuals to discharge debt under $250,000. This process enables individuals to negotiate agreements with their creditors that allow for partial payment with any remaining balance forgiven; additionally it protects individuals from legal or emotional pressure from creditors or debt collectors. A consumer proposal is administered by a Licensed Insolvency Trustee.
Though ideally suited to employed individuals with steady incomes, this solution can benefit anyone facing overwhelming debt. While this solution will still impact your credit score, but less severely than bankruptcy would. Furthermore, this path keeps assets intact and won’t interfere with sponsoring someone into Canada.
After this process is completed, you may qualify for a mortgage at lower rates; and even open a secured credit card, but beware of incurring too much debt in this endeavor.
2. Refinance Your Home
Once your consumer proposal has been successfully completed by the Licensed Insolvency Trustee, they will issue a certificate of completion which mortgage agents can use as evidence that you have fulfilled all the terms of it and are now ready to assume new debt again. Nonetheless, mortgage agents will still want to see how you have improved your credit profile post-consumer proposal.
As long as your client’s mortgage isn’t with the same bank as their consumer proposal and they can find private lenders willing to lend, refinancing should not be impossible after filing for consumer proposal. Indeed, refinancing could actually make their budgeting process simpler by reducing monthly payments while lengthening out their term if their current mortgage is about to end.
3. Apply for a Line of Credit
Even after filing for consumer proposal, it may still be possible to gain credit; it’s just important that when selecting products you select those which will help build your credit. Make sure your bills are paid on time every billing cycle to continue building a positive payment history.
Increased payments could also make managing the consumer proposal easier in the long run, helping reduce its total amount owed and make its management more manageable.
Increased payments, even by small amounts, can have a tremendous impact on your ability to rebuild your credit after completing a consumer proposal. But be wary about relying too heavily on credit to do this as this could create bad habits that make breaking them later more challenging.
4. Get a Debt Consolidation Loan
Consumer Proposals provide debt relief options for individuals unable to meet monthly payments on existing unsecured debts. Negotiation between creditors and debtors takes place to reduce total outstanding amount by agreeing monthly payments over up to five years on certain parts of debt such as credit card accounts or personal loans as well as taxes due to Canada Revenue Agency or taxes payable through Canada Revenue Agency; mortgage debt may not be part of this proposal agreement.
Consumer proposals offer many advantages beyond lowering interest rates and making payments more manageable, including helping avoid wage garnishment or asset seizures. It should be noted, however, that this solution could have long-term repercussions as part of your debt is discharged; hence it may not be suitable if seeking future credit at competitive rates; prioritising credit counselling as a solution may be best advised before opting for this path. To fully understand how consumer proposal explained options work and whether this is suitable for you, it’s best to seek out professional advice from a Licensed Insolvency Trustee.
