Pay Dirt Series – Financing Borrowers in Consumer Proposal

For those of us in the business for a long time, we’ll remember calling these, “Orderly Payment of Debts,” which honestly is a more descriptive name than Consumer Proposal.  As an alternative to bankruptcy, a Consumer Proposal allows a debtor to make arrangements with all of their creditors to make partial payments, often over time, to satisfy the debt, and avoid bankruptcy.

Consumer Proposals are viewed very differently from bankruptcy by lenders.  This is because debtors in Consumer Proposal are making an effort to make their creditors whole, at least partially if not in full.  Alternative lenders know that sometimes bad things happen to good people, and this is a good indicator of the character of the borrower.

Interestingly, this raises a red flag for many ‘A’ lenders, and they won’t lend if there is a Consumer Proposal still showing on the borrowers credit report, and they certainly won’t lend if there are still amounts owing.  That’s where alternative lenders fill the gap.  We’ll usually be willing to pay out Consumer Proposals from the proceeds of a refinance, and if we see a Consumer Proposal on title, it can actually be a positive indicator of the character of the borrower.  So in this sense, alternative lenders do help borrowers with an orderly payment of their debts.