Realizing you have a debt problem can be overwhelming, and if you’ve faced challenges with debt in the past you may have even more anxiety or uncertainty in figuring out how you can resolve your situation. If you find yourself with a debt problem again, know that you are not alone – and that you do have options to help you deal with debt and move on with your life, even if you’ve been through a Consumer Proposal or bankruptcy before.
Having previously filed and completed a Consumer Proposal, or personal bankruptcy, does not in any way make you ineligible from using a Consumer Proposal to manage debt. Read on to learn more about options for Consumer Proposal debt consolidation and forgiveness if you’ve worked with a Licensed Insolvency Trustee before.
Filing a Second Consumer Proposal in Canada
Whether you have done a Consumer Proposal before, or have previously completed a personal bankruptcy, a Consumer Proposal is a potential debt management option that can be considered to help you resolve your current debt challenges.
You do not need to work with the same Licensed Insolvency Trustee as before, and making a Consumer Proposal will follow virtually the same process every time, even if you’ve previously completed a Consumer Proposal or bankruptcy:
- A Consumer Proposal remains a unique legal option to consolidate debt without borrowing, offering individuals the ability to cut total debt down to what they can afford to repay.
- Reductions of up to 50-80% are common, over a period of up to 60 months.
- If at least 50% of your creditors (by dollar value) agree to your offer, your Consumer Proposal will be legally binding on all your creditors, even any who may not have voted to accept your offer.
- Virtually all types of debt (including government and Canada Revenue Agency debt) can be consolidated and significantly reduced through a Consumer Proposal.
How Many Times Can You Do a Consumer Proposal?
There is no limit on how many times a person can file a Consumer Proposal, and there is no penalty in subsequent Proposals for having completed a prior Consumer Proposal.
Although government creditors such as Canada Revenue Agency may expect a higher offer of repayment in subsequent Consumer Proposals if they are a creditor from which you have consistently sought debt forgiveness through multiple insolvencies. Nevertheless, the reduced balance and protection a Consumer Proposal offers could still provide substantial advantages compared to paying the debt in full, plus ongoing interest and other charges. A Consumer Proposal is one of only two legal Debt Solutions for Having Government Debts Forgiven.
Does it Cost More to File a Second Consumer Proposal?
No! There are no fees added to what you are offering to your creditors in your Consumer Proposal, even if you’ve done a Consumer Proposal or bankruptcy before.
Licensed Insolvency Trustee fees in all Consumer Proposals are set by government tariff, and are deducted from the funds creditors receive, making them covered at no additional cost to you the individual.
Impact of Second Consumer Proposal on Credit History
A subsequent Consumer Proposal will reflect the same way on your credit history as the first Consumer Proposal. You can expect Consumer Proposals to show as an ‘R7’ on your credit history report for three years after completing your Consumer Proposal, or six years from the date you filed your Consumer Proposal – whichever comes first.
Your credit history and score are constantly changing, and most people could expect to qualify for mainstream credit products within a year or two of finishing a Consumer Proposal, if not sooner.
Amending an Active Consumer Proposal
Whether you’ve accumulated new debts since your original Consumer Proposal was filed or there’s been an unanticipated change to your circumstances, connect with your Licensed Insolvency Trustee for guidance if you’re having renewed financial difficulties.
You can do a Consumer Proposal more than once, but you can’t have multiple active Consumer Proposals at the same time. Depending on the situation there may be a few ways we can help you get back on track, for example:
- If you already have an active unfinished Consumer Proposal but your situation has changed and your ability to finish your Consumer Proposal is being impacted, it may be appropriate to consider amending your existing Consumer Proposal to make the terms more appropriate to your changed circumstances.
- Alternatively, some people will choose to abandon an ongoing Consumer Proposal to ‘re-file’ a new Consumer Proposal or declare bankruptcy, although this is less common.
- If your incomplete Consumer Proposal was annulled due to missed payments, it may be possible to simply revive (restart) your Consumer Proposal.
Despite all best intentions, financial challenges can and do occur – and a debt problem can happen even to those who’ve previously worked hard to get to debt-free. In fact, 22% of Canadian consumers who made a Consumer Proposal or declared bankruptcy in 2019 had previously filed for bankruptcy according to the 2019 Canadian Consumer Debtor Profile.
We encourage you to bring any concerns to your Licensed Insolvency Trustee. We’re here for you throughout the process and want to help you achieve your debt-free goals. The sooner we can work together, the more options you may have – and with the least stress possible to you.
Debt Warning Signs to Watch Out For
It can be difficult to confront signs that debt is getting out of control. Especially if you’ve dealt with a debt problem before, it’s important to recognize you may have been in a completely different situation, so the indicators of problem debt may not look the same. Be on the lookout for signs such as:
- Overwhelming stress, or constantly thinking about your debt
- Only being able to make minimum monthly payments on your debt (especially credit cards)
- Relying on credit to make up gaps in income and to meet living expenses
- Accumulating more debt or stagnating balances even though you’re making payments
- Using credit to shuffle money for payments, or turning to family or friends to borrow funds to pay
- Considering (or being refused) for a debt consolidation loan
- Avoiding your account balances, creditors, or downplaying the situation to your spouse or partner
- Threats of (or already occurring) collections, court actions or wage or account seizures
If you think you might have a debt problem – you likely do, and although it may feel impossible, every single debt problem has a solution!
You don’t have to weigh your options and the pros and cons alone. Connect with a qualified debt expert – a local Licensed Insolvency Trustee, for a free and confidential assessment and consultation where we’ll explain and help you consider all your options, including (but not necessarily limited to):
- Informal debt management solutions like self-directed negotiations, credit counselling debt management plans and more.
- Formal debt management solutions such as legal debt consolidation with a Consumer Proposal or filing personal bankruptcy.
Need some advice about dealing with debt? Ready for a plan to be debt-free? Sands & Associates is here for you. Book your free confidential non-judgmental debt consultation today.