Home > 15 Most Commonly Asked Consumer Proposal Questions – Part 2

15 Most Commonly Asked Consumer Proposal Questions – Part 2

consumer-proposal-common-questionsPeople in debt have a number of questions about Consumer Proposals. In Part 2 we will continue and answer questions 7-10 from our list of the 15 most common questions of individuals who want to file a Consumer Proposal.

7. How Does a Consumer Proposal Impact My Credit Score?

The bad news is that your credit score will suffer when you file a CP.  Now the good news – it won’t be as bad as it would be under a bankruptcy. You will get a score reduction and be marked R7 and lenders will hesitate to advance new credit. Bankruptcy, on the other hand, will severely damage your credit score and you will get an R9 rating. This means that you’re unlikely to get any form of credit at all.

Keep in mind that it’s very likely that your credit score is already negatively affected by your financial situation. If you’ve delayed payments, are only making minimum payments, or have defaulted on payments, your credit score is likely already low. In this situation filing a Consumer Proposal will actually improve your score in the long term. Lenders will still see you as high risk but in a more positive light since you’re monthly payments are now fixed and you’re working towards dealing with all of your outstanding debts.

8. I’ve Heard That a Consumer Proposal is Free and Provides a 0% Interest Rate, is This True? How so?

A Consumer Proposal is free and has no hidden costs or fees that add to your existing debt burden. Other options have fees and costs that you need to pay in order to settle your debts; often these fees need to be paid up front. For example, if you choose credit counseling, you will have to pay $1000 to $3,000 in fees. With a Consumer Proposal, you just have to pay the agreed upon monthly payment until your proposal terms are completed.  All costs associated with the filing of your proposal are covered by your monthly payments; there are no additional costs to pay.  Once you file the Consumer Proposal you get relief from any additional interest charges.  This will reduce your financial burden so you’ll get the best possible chance to deal with your debt.

9. How is a Consumer Proposal Different From Credit Counseling?

Financial experts agree that a Consumer Proposal is a better alternative to credit counseling because it offers numerous advantages to the person in debt. Here are some important factors you need to consider:

  • You get legal protection from your creditors the moment the Consumer Proposal is filed with the government.
  • You might see a reduction of about 65% to 70% in your debt so it’s easier to pay off.
  • The interest is frozen for the duration of the proposal so you don’t have to pay it after you pay off the debt and that reduces your burden.
  • Both of these options will place an R7 rating on your credit score for 3 years after the debt is paid off.
  • You will be working with a government licensed professional – a Licensed Insolvency Trustee – when you file your Consumer Proposal

There are several other reasons why you should choose a Consumer Proposal over credit counseling so it’s a good idea to consult with an expert before you make a decision.

10. How Long Will I Have to Pay Off the Consumer Proposal? Can a Consumer Proposal be Paid-Off Early?

Most Consumer Proposals have payment terms of 3 to 5 years, with 5 years being the maximum time allowed for a Consumer Proposal.  The length of the Consumer Proposal is generally related to your income and total debt level.  Once the Consumer Proposal is approved by your creditors it is essentially a locked-in contract and your creditors can not request any further changes to the terms.

You can complete the payments early. For example, if your employment income has increased due to a raise or you received an unexpected inheritance, you can pay off the Consumer Proposal in full or increase your monthly payment which will mean the proposal is paid off early.  By completing your Consumer Proposal early you can get back to better financial health sooner.  Again, if your financial situation improves for the better, your creditors can not demand that you pay more money to them, you do not have to change the terms of your Consumer Proposal.


Now that you have a little more information and have considered these questions, does a Consumer Proposal sound like a viable solution for you? If so, don’t hesitate to call us for your FREE, no-obligation consultation. We will gladly answer any questions you may have and provide unbiased advice on your debt management options in general.

Freedom from debt is possible. Take the first step today, call us.


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