Short Answer

You can apply for credit while in a consumer proposal but probably won’t be approved unless it is secured by a prepaid balance. The whole program was designed to help an unfortunate debtor get out from overwhelming debt not acquire more.

We understand that often you need access to a credit card to rent a car, make on line purchases, etc. Most debit cards have this option now.

If you apply for more than $1,000.00 in credit while in a proposal you are legally obligated to tell them you are in a proposal.

A Bit More Detail

Yes, you can apply for credit while in a consumer proposal and even get credit in some circumstances but generally we try to steer consumer debtors away from applying for credit.  Until you have had months of budgeting and understanding how money and credit works, we suggest not applying for credit while in the consumer proposal.

In a recent case, we had an individual who owed $45,000 on a car loan and the car was worth $20,000.  This is called negative equity.  A consumer debtor may wish to allow seizure of this vehicle and stop making payments on the vehicle.  Then the debtor borrowed money to obtain a cheaper and more affordable car. Any shortfall from the sale of the seized car can be included in the consumer proposal.

In many cases, when you file a consumer proposal, you will need to hand over your credit cards to your Licensed Insolvency Trustee. You won’t be able to apply for a new credit card while you’re making payments on your proposal—unless it’s a prepaid or secured credit card.

Do you have more questions about Consumer Proposals? Try visiting our questions page here – Questions About Consumer Proposals

If you have any questions we haven’t answered please don’t hesitate to reach out to us, we’re here to help.