A consumer proposal damages your credit. Anyone who tells you otherwise is selling you something. What matters is how much, for how long, and what you are comparing it against. The honest comparison is almost never a clean credit report.
How long does a consumer proposal stay on your credit report?
Three years after you make the final payment, or six years from the date it was filed, whichever comes first. That is the rule the Financial Consumer Agency of Canada publishes, and it is how both bureaus apply it.
- Equifax removes it three years after you have paid off everything in the proposal, or six years from the date it was filed, whichever comes first. That wording is on Equifax’s own page.
- TransUnion removes it three years from the date you satisfied the proposal, or six years from the date you defaulted on the accounts, whichever comes first. The six-year clock at TransUnion runs from the default, which is usually earlier than the filing.
- The individual accounts inside the proposal are marked R7, which means a formal arrangement to repay. Those entries clear on the same schedule.
So the clock can run from when you finish, not from when you file. A three-year proposal and a five-year proposal for the same debt do not leave your report at the same time. You are allowed to pay it out early without penalty, and that moves the date forward.
An example. Say your proposal runs the full five years. Three years after the last payment would be year eight, but six years from filing comes first, so it drops at year six. Now say you pay it out in two years. Three years after that is year five, which comes before year six, so it drops at year five. Same debt. The only change is when you finished.
How it compares with everything else on a report
People weigh a proposal against a clean slate. Weigh it against what is on the report already, and against the alternatives. These are the federal agency’s figures.
| What it is | How long it stays |
|---|---|
| Consumer proposal | Three years after the final payment, or six years from filing, whichever is first |
| First bankruptcy | Six years after discharge. Seven years in Ontario at one bureau |
| Second bankruptcy | Fourteen years |
| Debt management plan through a credit counsellor | Two years after the last payment |
| An account sent to collection | Six years from the first missed payment |
| A court judgment | Six years. Seven in Ontario at one bureau |
| A hard credit inquiry | Three years at Equifax, six at TransUnion |
Look at the collection and judgment rows. Those are what a person who does nothing collects, one after another, each with its own six-year clock. A proposal replaces an open-ended set of marks with one mark that has a date on it.
How it compares with bankruptcy
A first bankruptcy stays on your record for six to seven years after discharge, depending on the bureau and the province. It is rated R9, the lowest rating. A consumer proposal is rated R7 and is generally the lighter mark, and for most people it is the shorter one. Neither one is invisible.
The fuller comparison, including what you keep and what you pay, is on our consumer proposal or bankruptcy page.
Does a consumer proposal affect your credit score?
Yes. It falls, usually to the lowest band. But look at where it is falling from. By the time most people come to a proposal, the report already carries missed payments, accounts in collection, and sometimes a judgment. Those entries have no end date. They keep arriving for as long as the debt does.
A proposal puts a stop to that. It trades an open-ended problem for one with a date on it. That is the real trade, and it is why your score often starts to recover while the proposal is still running.
Can you keep a credit card after a consumer proposal?
Not one that is included. Every unsecured account in the proposal is closed. That includes a card with a zero balance at the same bank, because banks routinely close the whole relationship.
A card from a bank you owe nothing to is a different question, and sometimes the answer is yes. Do not assume it. Every file is different. Ask us before you file. Finding out afterwards is how people end up with no way to rent a car.
What about your mortgage?
Your mortgage is a secured debt. It is not in the proposal, and as long as you pay it, nothing changes with the house. The question comes at renewal. Some lenders renew a mortgage during a proposal without a word. Some will not, and you move to a lender that will, sometimes at a higher rate. If your renewal is within the next two years, tell us the date at the start. It changes how the offer is shaped.
Rebuilding, and when to start
Start during the proposal, not after it. If you wait until the final payment, you throw away years of history you could have been building.
- Get a secured credit card. You put down a deposit and the limit matches it. It reports to the bureaus like any other card, and that is the whole point. Use it for small things and clear it in full every month.
- Never carry a balance while you rebuild. How much of the limit you use matters more than the limit itself. A card used to ten percent and paid off reads better than one used to ninety.
- Check both reports once a year. They are free, and errors are common. An account still showing as owing after it was included in your proposal is a mistake you can correct.
- Keep the rebuilt card open afterwards. Age of credit counts, and closing your oldest account resets it.
What it does not touch
It is not a criminal record, and for most work it will not cost you your job. Some regulated roles do ask, particularly in finance and in positions that need bonding or a security clearance. If you are in one of those, check your own professional rules before you file, not after. How you answer their questions matters.
The insolvency record itself is public. The Office of the Superintendent of Bankruptcy keeps a searchable database, and anyone willing to pay the search fee can look. In practice almost nobody does. But it is true, and you should hear it from us rather than find out on your own.
Questions people ask
Does paying it off early change when it comes off?
Yes. The three-year clock at both bureaus runs from your final payment. Finish in year two and it is gone in year five instead of year six.
What does R7 mean?
R7 is the code a lender puts on an account that is being repaid under a formal arrangement, which is what a consumer proposal is. R9 is the code for a bankruptcy or an account written off. R1 is paid as agreed. The R7 sits on each account in the proposal for the same period as the proposal itself.
Will the proposal show up if a landlord or an employer checks?
On a credit check, yes, while it is on the report. Most employers do not run one. Landlords often do, and a proposal with payments being made on time reads better to many of them than a page of collections.
Is a proposal better for my credit than a bankruptcy?
Usually. It carries the lighter rating, R7 against R9, and for most people it leaves the report sooner. It is not better for your credit than paying the debt in full, if you can. If you cannot, that comparison is not the one in front of you.
The short version
Three years after your last payment, or six from filing, on the lighter of the two routes, starting from a report that is usually already damaged, and you can start rebuilding in the first month. That is the real cost. For most people, it is smaller than the problem it replaces.
Where we fit
Get Total Debt Relief is a debt consulting and representation firm, not a Licensed Insolvency Trustee. Only a Licensed Insolvency Trustee can file your documents for a consumer proposal or a bankruptcy with the Superintendent of Bankruptcy. What we do is the work before the filing: we go through your whole situation with you, we answer your questions for as long as it takes, and the path you choose comes from that.
You can read how a consumer proposal actually works.
DISCLOSURE:
Get Total Debt Relief is a debt consulting and representation firm. We are not a Licensed Insolvency Trustee, and we are not connected to the Canada Revenue Agency or any government body.
Only a Licensed Insolvency Trustee can file your documents for a consumer proposal or a bankruptcy with the Superintendent of Bankruptcy.
OUR SERVICE:
However, any Trustee you choose can’t legally represent you over your Creditors nor can he give you any advice that will benefit you over your Creditors. The Trustee’s job is to maximize how much he can get from you and your estate for the benefit of your Creditors and the more he collects in a Proposal, the more he makes.
What we do is the work before the filing and the path you choose will come from the advice and information that goes with it. More importantly, we use tools that are not available to the Trustee because of who’s interests he represents. We go through your whole situation with you. We answer your questions, for as long as it takes and as many times as you need to ask them. Every consultation is free and if or when you decide to move forward, you’ll know which option best suits you, your family and or your business. And, unlike the Trustee, we will NEVER use the information you’ve given us against you in Court. The bottom line is that we don’t look to liquidate your assets and equities, we look to protect them.
Every consultation is free, and you can call as many times as you need. Call 647-276-8844 or talk to us.