A guide to life after Consumer Proposal

You’ve made your last payment but now what? How to establish and keep good financial habits following a Consumer Proposal.

The difficult part is over. You’ve completed your counselling sessions, paid your Consumer Proposal in full and now it’s time to look toward your future. A debt-free future.

But what’s next?

Shortly after the process if completed, you’ll receive some important documents from the administrator of your Consumer Proposal including the Certificate of Full Performance, Statement of Receipts and Disbursements, Notice of Taxation of the Administrator’s Accounts, and the Discharge of the Administrator.

Credit reporting agencies will be notified of the completion of your proposal by the government agency that regulated Licensed Insolvency Trustees (LIT) and then you’re free to live your life and strive to maintain your financial freedom.

What’s next?

Celebrate your achievement but try not to get ahead of yourself. You’ve made a lot of progress and now it’s time to chart your path forward. Taking a few steps everyday will help you build the roadmap to focus your goals, plan your progress, and keep looking toward your future.

Here are some simple steps to help you get started:

1. Get your credit report: Request your credit report from Equifax and TransUnion. Be wary of third-party vendors that offer free subscription-based credit reports and credit scores. Go over your credit report carefully and check it for accuracy. Any errors will slow the process – report any inaccuracies you see as soon as possible. Knowing where you’re at will help you determine what you need to get you where you want to be.
2. Set financial goals: A difficult and stressful financial situation may have left you feeling defeated and not looking forward to the future. Now, you have a chance to plan for the things you want in life. This could include purchasing a home, buying a new vehicle, or borrowing money for things like home renovations or your child’s education. Whatever your goals look like, write them down and refer to your list often for inspiration and reassurance that the process was and will continue to be worth it.
3. Choose your path forward: Rebuilding your credit is a key part of the Consumer Proposal process, for some. There are a few choices when it comes to the products that can help you do this such as secured credit cards and lines of credit. Consulting with a financial advisor will help you make the right choice for you.

Rebuilding your credit

This part of the process may seem a bit daunting. You’ve just gotten out of debt but now you need to rebuild your credit. With the skills you’ve learned throughout the Consumer Proposal process, rebuilding your credit is a helpful exercise to test what you’ve learned and hold you accountable.

Before applying for credit, design a personal spending plan. Knowing your income and expenses – all the inner workings of your budget – will help you decide if you’re ready to start rebuilding your credit.

Determining how you will use your credit is essential. Creating spending categories for the credit card(s) or line of credit, building a savings plan, and setting financial boundaries for yourself are all key to the success of your credit rebuilding journey.

If you’re confident in your situation and ready to start, consider these ways to rebuild your credit:

• Secured credit cards: A secured credit card is one that’s secured by a deposit account owned by the cardholder. Financial institutions will normally set the credit limit on the card to an amount equal to or greater than your deposit. If you fail to make payments, the institution may use that deposit to pay what you owe. These are a good way to ease back into credit, especially if you’re unlikely to be approved for a typical, unsecured credit card.
• Build a relationship with your bank: Do most of your banking through one institution – chequing account, savings, and credit card. Being a member in good standing with one bank could lead to greater perks in the future.
• Installment loans and lines of credit: Eventually, you’ll be able to look at longer term credit products like installment loans and lines of credit. Setting up an installment loan with a payment schedule is one of the safest ways to rebuild your credit because you’re unable to access the funds you’ve repaid. Lines of credit offer low interest rates and their minimum payments are made up of both a principal and interest portion.
• Savings and RRSP loans: If you don’t qualify for a regular loan, a savings loan is another available option. You won’t receive any money up front but rather will make payments to the lender who will give you back the installment payments you made minus interest and fees at the end of the term, and you’ll be building credit along the way. Depending on your credit rating, another option is to open an RRSP account with an attached loan that you pay down monthly. This will help you maximize you RRSP contributions and save for your retirement all while increasing your credit score.

If you’re ready to start rebuilding your credit, and depending on your future financial goals, you’ll want to get multiple types of credit. Using a multi-level approach to credit can be helpful in establishing a quality credit history and score which will be useful if you plan on applying for a mortgage or a more sizable loan down the road.

Take the process slowly and ease your way back into credit. A financial advisor can help you work through your options and provide recommendations along the way so you can start enjoying your financial freedom.

Look on the bright side

Getting relief from your debts is only one positive element to completing your Consumer Proposal. You’ve given yourself the opportunity to create a new financial future and should be proud of how far you’ve come.

As more time passes since completing the process you may notice that you have a greater appreciation for and awareness of your money, how you spend it, and what you spend it on. In the Consumer Proposal process, you likely took greater accountability and responsibility for your spending than before you started that journey. Consider this a win and use those skills moving forward to keep up with the good financial habits you’ve learned to establish.

Becoming a better communicator is another hidden benefit of Consumer Proposals. Overwhelming debt can put a significant strain on your relationships and cause shame and guilt to get in the way of vulnerability. Having control of your finances gives you the peace of mind to be an open person with hope for the future.

Lastly, and maybe most importantly, you now have time to focus on the things that matter to you. Rather than worrying about how you might make a payment or how you’re ever going to get out of debt, you can now spend time with your family and friends without worry looming over you. Changing your habits in a positive way, frees you up to enjoy the present and make the most out of it.

Our team of Licensed Insolvency Trustees is here to support you throughout the Consumer Proposal journey. As you move on from the process itself, MNP advisors can help you stay debt free and keep practicing good financial habits.

Contact Lana Gilbertson, Senior Vice President of Insolvency, at 604.637.1599 or lana.gilbertson@mnp.ca to learn more tips to succeeding on your post-Consumer Proposal journey and the tools available to you.