1. “I don’t
want my credit to be impacted.”
Rebuttal:
That’s absolutely understandable—and you’re
not alone. Most people we speak to share that concern. But here’s the honest
truth: the moment you’re unable to pay even $1 less than what you owe,
your credit is already impacted. Whether it’s missed payments, collections, or
maxed-out credit cards—these are all red flags that lower your credit score
over time.
Now, a consumer proposal does show up
as an R7 rating—which simply means “paying under special arrangements.”
But it’s important to remember two things:
- This impact is temporary.
- It’s far less damaging than a bankruptcy (R9) or continuing
to default on your current debts.
We’ve seen many clients start rebuilding their
credit as early as 8 to 9 months after filing—especially if they’re
consistent with proposal payments and attend the two free financial counseling sessions provided by the Licensed Insolvency
Trustee. These sessions help you understand budgeting, responsible credit use,
and how to improve your score faster.
📌 Example: One of our clients had a 520 credit score at the time
of filing. Within a year, after following rebuilding steps and getting a
secured credit card, they crossed 650—enough to qualify for basic credit
facilities again.
Most importantly—ask yourself this: Are you
more concerned about your credit score today, or the daily stress and growing
debt you’re carrying right now? Because fixing the credit score means
nothing if the underlying debt problem continues to grow.
2. “Why do
I need to change my bank account?”
Rebuttal:
Great question—and one that could save you
from a serious financial surprise.
If you owe money to the same bank where your paycheck is deposited, or if you’ve taken payday loans
linked to your current account, you’re at real risk.
Here’s why: banks and credit unions have a
legal ability called the “Right of Offset”. This means that if you
owe them money and they’re notified about your consumer proposal, they can:
- Freeze your account
- Take money out of
your account without prior notice
- Use your paycheck or savings to recover what you owe them
This could happen overnight—and we’ve
had clients find out only when their debit card stopped working.
🔒 Example: One client had a line of credit and a chequing account
at the same bank. As soon as their proposal was filed, the bank froze the
account and took $2,000 from their pay that had just been deposited.
So here’s what we recommend:
- Open a new account at a bank you don’t owe money to
- Transfer your paycheck, automatic
deposits, and savings to
the new account
- If needed, move mortgage payments or bills—this is easy to do and
avoids complications
Even if you don’t owe that bank money today,
it might still be wise to open a new account. If you’ve set up pre-authorized
debits for multiple creditors, stopping those can be expensive and
time-consuming. A new account helps you control where your money goes and
avoids “accidental withdrawals” after filing.
Bottom line: Changing
your bank account is about protecting your hard-earned money and making
the process clean, safe, and smooth.
3. “What
about my mortgage or RESP/RRSP if I change banks?”
Rebuttal:
Good news—secured assets like your mortgage
or registered savings (RRSPs, RESPs) are generally not affected by a
consumer proposal. You’re allowed to keep them.
Let’s break it down:
- Mortgage: You can continue making payments from
any bank account—even if your mortgage is with your previous bank. Just
redirect the payment from your new account.
- RRSPs/RESPs: If
they were not funded recently through excessive contributions, they’re protected
under law. You don’t have to worry about losing those funds.
By opening a new bank account, you ensure:
- Your proposal payments stay on track
- Your living expenses are protected
- You avoid stress from account freezes or “offsets” on payday
4. “Can I
get credit again in the future?”
Rebuttal:
Absolutely, yes. A consumer proposal is
designed to help you recover—not punish you forever.
Once you’ve made several consistent payments
(typically 8–12 months in), lenders can see your commitment and stability. Many
clients get approved for secured credit cards, car loans, or even small
personal loans while still in the proposal.
✅ Example: A client got approved for a $1,500 secured credit
card six months after filing. Another client refinanced their car loan
within a year at a better rate after improving their credit score.
Additionally, the two financial counseling sessions help guide you on how to:
- Rebuild credit step-by-step
- Budget better
- Use credit responsibly without falling into debt again
5. “Will
this affect my ability to buy a home?”
Rebuttal:
It doesn’t stop you from buying a home—but it
does mean you need to plan smartly.
While you’re in a proposal, you may not
qualify for traditional mortgages right away. But if you rebuild your credit
during the proposal and save for a down payment, there are lenders who
specialize in helping people in or after proposals.
⏳ Example: One client filed a proposal, rebuilt their credit with
a secured card, and in 2.5 years qualified for a mortgage with a “B lender” at
a reasonable rate.
So while you may face a delay in your home
ownership journey, the real key is eliminating your debt first—because
it’s hard to think about buying a home when your monthly payments are going
toward 5–6 credit cards and payday loans.