Sometimes we face financial crises and let debt get out of hand.  If the situation becomes untenable, you may turn to bankruptcy or consumer proposal.

Consumer Proposal: A debtor makes an offer to creditors to modify his or her debt obligations. This can include lower payments over a longer period of time, or a percentage of what is owed.

Bankruptcy: A debtor who declares bankruptcy is discharged from his or her debts, subject to conditions.  A Licensed Insolvency Trustee (LIT) sells the debtors assets and the funds are distributed among creditors.  Declaring bankruptcy means your unsecured creditors will not be able to recover debts from you, such as by seizing assets or garnisheeing wages.

While bankruptcy and consumer proposal do not preclude you from applying for a mortgage, it does make obtaining a mortgage at a good rate more difficult. They will severely impact your credit score, and can stay on your credit report for up to 7 years.

While consumer proposal is preferable to declaring bankruptcy in a number of ways, in the eyes of lenders reviewing your mortgage application, they are the same. If you are looking to obtain a mortgage after paying your consumer proposal in full, you should expect lenders to treat you as if you have declared bankruptcy. Lenders will want to see that you have obtained re-established credit and most of them will want to see that re-established credit for at least 2- 3 years.

There are several factors lenders will consider when you apply for a mortgage following bankruptcy or a consumer proposal.  Lenders will want to know the reasons for declaring bankruptcy, the length of time since you have discharged your bankruptcy, and your new credit score.  

If you are looking for a mortgage approval, lenders will look for you to re-establish credit, reach minimum beacon scores, have saved a good down payment, have good job stability, and good debt servicing ratios.   Whether you have filed for bankruptcy or consumer protection, you should be aware that even if you meet the aforementioned requirements, you may be subject to a higher interest rate or extra fees.

A mortgage broker can help you get approved for a mortgage, even after bankruptcy or consumer proposal.  I know the right lenders, that will give you the best rate possible for your situation.  Call me to discuss how we can get you the best mortgage for you.