“If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed.” –Edmund Burke
We’ve already taken you on a journey from debt to relief in our post on the Consumer Proposal journey in Canada and we’ve tried to help you discover the real (and hidden) costs that a Consumer Proposal will have on you. With this, we’ve all come to realize that it can be difficult to get back on the right track in rebuilding your credit score once you are in a Consumer Proposal. But how long does it really take to rebuild your credit? Let’s go through the steps from insolvency to consumer proposal and how you can begin to fast-track your way to complete financial wellness, to rebuild your credit and exit your consumer proposal.
I’m Insolvent – what happens next?
Firstly, Canadians are considered insolvent when they are unable to pay back their contractual debt to lenders on time.
According to Huffington Post, there were more than 32,000 consumer insolvencies in the first quarter of 2019 alone. This is a 6.1% increase from the year previous and the biggest jump made since the world-wide financial crisis in 2008. So, if you become insolvent, you are provided with two options in order to formally dissolve or reduce your debt. These options are either: Bankruptcy or a Consumer Proposal.
As explained by The Government of Canada, a Consumer Proposal is like a ‘soft bankruptcy’ and is a legally binding contract between you and your lender. This allows you to develop a payment plan to pay back all or some your debt with your lender, within an agreed timeframe and agreed terms. All creditors must agree on the terms of your proposal or you must file for bankruptcy. Unlike a bankruptcy, you can pay back all your Consumer Proposal debt at once, if you wish to do so.
How will my Consumer Proposal impact me?
With a Consumer Proposal, we don’t instantly know how it’s going to affect our financial future. We do know that when in a Consumer Proposal, it can take you out of mainstream banking. This also eliminates all opportunities for you to obtain any other loans.
As mentioned by Credit Canada, because a consumer debt proposal drops your credit rating down to an R7, lenders are unlikely to take you on as a borrower. If you miss any payments from here, you risk bankruptcy and obtain the lowest credit rating, R9. So the question we are all asking is, how do I rebuild my credit after a Consumer Proposal and where do I go from here?
As stated by Halifax Debt Freedom, a Consumer Proposal is structured over 60 months (5 years), which is how long you must pay it off completely. After this, the Consumer Proposal will stay on your credit report for 3 more years. This means your Consumer Proposal will stay with you for a total of 8 years. This is the timeframe it will take you to get your finances stable again. Throughout this long period, your credit score will stay poor. Remember – Consumer Proposals weigh you down even with consistent payments against your consumer proposal, your credit won’t improve.
Can I exit my Consumer Proposal and rebuild my credit, fast?
At Marble, we believe that good credit starts when you exit your Consumer Proposal. We offer products to positively impact your current financial situation and this begins with our Fast-Track loan. We work with your trustee to pay off your entire consumer proposal debt immediately. Also, we work with you to design a reasonable monthly payment plan. Following this, we report your payments to the credit bureau, to further build your credit. Hopefully, we will see an increase in your credit score from 30 – 70 points, with a continued increase depending on your financial habits. We plan to have you back on your feet and rebuilding your credit score, faster than the usual 8 years that is required of your Consumer Proposal.
About Marble Financial Inc. dba Marble Financial (CSE: MRBL; OTCQB: MRBLF) we are a group of forward-thinking financial technology experts that fully understand the benefits and drawbacks of credit in Canada. Marble helps Canadians rebuild their credit to gain access to prime lending, through our industry-leading proprietary technology solutions Fast-Track Loan, Score-Up, and Credit-Meds. Our proven strategy guides our customers back to a meaningful credit score, 50% quicker than traditional methods. Since 2016, Marble is proud to have empowered thousands of Canadians to a positive financial future. With this, we continue to establish ourselves as leaders in financial wellness.