Can I borrow during a consumer proposal?


A consumer proposal is a popular debt management strategy in Canada that allows individuals to negotiate with their creditors and settle their debts for less than the full amount. Although it offers several advantages, many people who opt for it may wonder if it is possible to borrow during a consumer proposal. Therefore, in this article we will answer this popular question.

What is a consumer proposal?

Before clarifying whether it is possible to borrow during a consumer proposal, it is necessary to define this method of debt management. Thus, this is a formal agreement between a debtor and his creditors outlining a repayment plan for debts incurred. 

The proposal is handled by a licensed insolvency practitioner (LIT), who acts as a mediator between the parties. So, a good example of a consumer proposal is when a licensed professional helps the debtor develop a plan that is affordable and reasonable and presents it to the creditors. Once they accept the proposal, the debtor begins making payments to the LIT, which distributes them to the creditors.

Is it possible to borrow during a consumer proposal?

There are multiple consequences of the consumer proposal, most of them positive: stopping calls and wage garnishments, protecting your assets, providing more manageable payment terms, rescuing your credit score, etc.

Despite this, and to answer the question of whether to borrow during a consumer proposal, it is not recommended and there are several reasons for this.

First, this is a legal process that requires individuals to follow a strict repayment plan. If you incur new debt during this process, you may not be able to follow your plan, which may result in your proposal being rejected. In addition, if you miss payments or fail to pay your new debt, it may negatively impact the consumer’s proposal credit report. 

Another reason why it is not a good idea to borrow during a consumer proposal is that, similar to applying for a loan after bankruptcy, it is unlikely to get a personal or other loan during this period. This is because one of the consequences of the consumer proposal is the image that you are unable to manage your debts, making you a higher risk borrower. 

Finally, to borrow during a consumer proposal can be viewed as an attempt to defraud creditors. When a consumer proposal is submitted, they are required to disclose all of their debts and assets. If individuals incur new debts, they may be viewed as attempting to avoid their obligations to their current creditors. This can result in their proposal being rejected or, worse, criminal charges being filed.

Alternatives to obtaining a personal loan during the consumer’s proposal

If you are in this process and need additional funds, there are more effective ways you should consider. One option is to explore the possibility of negotiating with your creditors to extend your repayment plan or reduce your monthly payments.

You can also opt for a debt consolidation loan, which is designed to have a single monthly payment. While they may not be available during a proposal, you can try this alternative after the proposal period is completed.  


Finally, while there is a small chance that you may be approved for a loan, it is strongly discouraged to borrow during a consumer proposal. This is because, although individuals may be tempted to take on new debt to help manage their finances, it can negatively affect their consumer proposal credit report.

In Quebec, a professional advisor will surely tell you that by following the repayment plan and managing your finances effectively, you will be able to successfully complete your proposal and rebuild your credit over time.

We hope this article will allow you to finally answer the question about whether to borrow during a consumer proposal or not. If you wish to learn more about personal finance, you can visit our blog. On the other hand, if you are looking for an insolvency administrator in Quebec, we recommend you to contact Poupart Syndic.

Poupart Syndic Inc. holds a licensed insolvency trustee license, an essential criterion when choosing a licensed insolvency trustee?
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