Consumer Proposals and Your Credit Report
A Consumer Proposal is a great way for many people to address their debt and avoid bankruptcy.
A Consumer Proposal’s primary consequence is that it damages your credit and remains on your credit report for three (3) years after your last payment. This means that if you take five years to complete your consumer proposal that it would remain on your credit report for a total of eight (8) years (the five years you were paying your proposal plus three additional years on your credit report).
On the other hand, if you complete your Consumer Proposal in one year, then it would be purged from your credit report after 4 years (the one year you paid your proposal for plus three additional years).
Upon filing your Consumer Proposal your individual credit facilities reported on your credit report will be listed as R9, which is the same rating the facilities would receive if they were in collections or included in a bankruptcy. Often, individuals who are considering a Consumer Proposal already have accounts in collections, meaning that a Consumer Proposal will have little impact on their credit if their accounts are already rated R9.
The good news is that these individual credit facilities will rise to an R7 rating upon the full performance of your Consumer Proposal.
In addition, there is a public disclosure section of your credit report that will disclose your Consumer Proposal and when it was filed. Unfortunately, Canada’s two credit bureaus, Transunion and Equifax, often list Consumer Proposals incorrectly as bankruptcies. It is our experience, that individuals are able to correct their credit report by contacting the credit bureaus directly and registering a dispute.
No Trustee in Canada corresponds directly with any credit bureau. Instead, Trustees report to the Office of the Superintendent of Bankruptcy who in turn makes reports to the Credit Bureaus. Therefore, any individual who seeks to correct their credit report must contact the credit bureaus directly.
We never suggest that your credit rating should be your primary focus. The most important question is: Can you repay your debt on your own? If you can, then you can maintain your credit. If you can’t, then you likely require the services of a Licensed Insolvency Trustee like Steve Welker and Company, or at the very least you would benefit from a free consultation with one of our Trustees. If you can’t repay your debt, then stop treading water just to maintain a credit rating. Focus on erasing your debt, and rebuilding your credit once debt free.
Find links to the two credit bureaus dispute processes below:
Transunion Disputes: https://www.transunion.ca/assistance/credit-report-disputes
Equifax Disputes: https://www.consumer.equifax.ca/personal/dispute-credit-report/