Can You Get Credit During a Consumer Proposal in Canada?

If you’re in a consumer proposal, you already know things feel different — creditors have stopped calling, interest has frozen, and you’re finally making progress on your debt. But then a real-life situation comes up: you need a new phone plan, your car breaks down, or you just want to know if you’ll ever qualify for credit again.

The short answer is yes — you can get credit during a consumer proposal in Canada. But it’s not the same as applying before you filed, and there are important things to understand before you sign anything. Let’s walk through what’s actually possible, what to watch out for, and how to use this time to set yourself up for a stronger financial future.

Quick Answer You can apply for and receive certain types of credit while in a consumer proposal — most commonly a secured credit card. There’s no law preventing you from borrowing, but your R7 credit rating means approval is harder and interest rates are higher. A secured card is the safest way to start rebuilding without putting your proposal at risk.

What Is a Consumer Proposal?

A consumer proposal is a formal, legally binding agreement between you and your unsecured creditors. It’s administered by a Licensed Insolvency Trustee (LIT) under Part III, Division II of Canada’s Bankruptcy and Insolvency Act. Through a proposal, you agree to repay a portion of your unsecured debt — typically 30% to 70% of what you owe — over a period of up to five years, with no interest.

Once your proposal is filed, an automatic stay of proceedings kicks in. That means creditors must stop collection calls, wage garnishments, and lawsuits. You keep your assets, including your home and vehicle, and you make a single monthly payment to your LIT, who distributes the funds to your creditors.

Consumer proposals have become the most popular formal debt relief option in Canada. According to the Office of the Superintendent of Bankruptcy, proposals now outnumber personal bankruptcies every year — a clear sign that Canadians prefer a structured repayment path that protects their assets and allows faster credit recovery.

How a Consumer Proposal Affects Your Credit

When you file a consumer proposal, the accounts included in it are reported as R7 on your credit report. R7 means you are making regular payments through a special arrangement — it sits below R1 (paid as agreed) but well above R9 (bankruptcy or bad debt written off).

This R7 notation stays on your credit report for three years after you complete the proposal, or six years from the date you filed — whichever comes first. That means if you pay off your proposal early, the mark clears sooner. Your overall credit score will drop, and most mainstream lenders will view you as higher risk during this window.

However, it’s worth remembering that by the time most people file a consumer proposal, their credit is already damaged from missed payments, collections activity, or maxed-out credit lines. The proposal itself is often the beginning of recovery, not the cause of a new problem. With the right approach, many Canadians begin improving their credit score while they are still making proposal payments.

Pros and Cons of Getting Credit During a Proposal

Advantages

Start Rebuilding Early Getting a secured credit card during your proposal means you can begin establishing positive payment history right away, rather than waiting until the proposal is complete.

Practical Necessity Some situations require a credit card — renting a car, booking a hotel, or setting up certain subscription services. A secured card gives you that ability without taking on risky debt.

Better Position After Completion Canadians who actively rebuild credit during their proposal often come out of it with a higher score than those who wait, giving them access to better rates and products sooner.

Demonstrates Financial Responsibility Consistent, on-time payments on a new credit account show future lenders that you’ve changed your financial habits — even while managing an existing proposal.

Disadvantages

Higher Interest Rates Any credit you do qualify for will carry significantly higher interest rates than what’s available to borrowers with good credit. This makes carrying a balance very expensive.

Risk of Overextending Taking on new debt before your proposal is finished can stretch your budget too thin. If you miss three proposal payments, your proposal is automatically annulled and your full debts are reinstated.

Limited Approval Options Most unsecured credit products will be out of reach. Your options are largely limited to secured cards and, in some cases, subprime auto loans.

Fees Add Up Secured credit cards and subprime products often come with annual fees, setup fees, and higher service charges that erode the value of having the account.

Who Should (and Shouldn’t) Consider New Credit

Getting credit during a proposal may be a good fit if you:

Want to start rebuilding your credit score with a secured card and can afford the deposit
Have a genuine practical need for a credit card (travel, car rental, online purchases)
Are making all your proposal payments on time and have room in your budget
Have completed your mandatory credit counselling sessions and feel confident managing credit responsibly

You may want to hold off if you:

Are already struggling to make your monthly proposal payments
Feel tempted to use new credit for discretionary spending rather than rebuilding
Haven’t spoken with your Licensed Insolvency Trustee about your plan
Are being approached by lenders offering “guaranteed approval” at very high interest rates — these are often predatory products

Credit Options Available During a Consumer Proposal

Secured Credit Cards

A secured credit card is the most common — and safest — way to access credit during a consumer proposal. You provide a cash deposit (usually $300 to $500), and that deposit becomes your credit limit. Because the lender’s risk is covered by your deposit, approval is much more likely even with an R7 rating. Your payment activity is reported to the credit bureaus, which means on-time payments directly help rebuild your score. Several Canadian financial institutions offer secured cards specifically designed for people rebuilding credit.

Vehicle Loans

If you genuinely need a vehicle for work or family obligations, some subprime lenders will approve an auto loan during a proposal. Expect a higher interest rate (sometimes 10% to 20% or more), a larger down payment requirement, and proof of stable income. Before committing, talk to your LIT to make sure the new payment won’t threaten your ability to keep up with your proposal. For a deeper look at borrowing options, see our guide on getting a loan during a consumer proposal.

Prepaid Credit Cards

Prepaid cards aren’t technically credit — you load your own money onto the card and spend only what’s on it. They won’t help rebuild your credit score because there’s no borrowing involved, but they’re useful for everyday transactions where a credit card number is required, like online shopping or booking a hotel.

Always check with your Licensed Insolvency Trustee before applying for any new credit during your proposal. While there’s no legal restriction, your LIT can help you understand whether new credit makes sense for your specific financial situation and ensure it won’t put your proposal at risk.

Financial Example: Secured Card Rebuilding

Here’s how using a secured credit card during your proposal can look in practice:

Secured card deposit$500

Credit limit$500

Monthly spending (kept under 30%)$100–$150

Monthly paymentFull balance each month

Annual fee (typical)$50–$75

Credit bureau reportingR1 (paid as agreed)

By keeping your utilization under 30% and paying the full balance every month, the card is reported as R1 — the best possible rating for that account. Over 12 to 24 months, this consistent positive history begins counterbalancing the R7 from your proposal. When your proposal is complete and the R7 eventually drops off, you’ll already have an established track record of responsible credit use.

Steps to Get Credit During Your Proposal

Talk to your Licensed Insolvency Trustee first. Before you apply for anything, discuss your plans with your LIT. They can review your budget, confirm your proposal payments are on track, and advise whether new credit is appropriate right now.
Complete your credit counselling sessions. Consumer proposals require two mandatory financial counselling sessions. These sessions cover budgeting, credit management, and responsible borrowing — knowledge you’ll need before taking on any new credit products.
Check your credit reports. Order free copies of your credit reports from both Equifax and TransUnion. Make sure the information is accurate and that your proposal is correctly reflected. Errors on your report can make approval harder than it needs to be.
Apply for a secured credit card. Research secured cards from Canadian issuers. Compare annual fees, interest rates, and deposit requirements. Apply for one card only — multiple applications in a short period can further lower your score.
Use the card responsibly and consistently. Charge small, regular purchases (groceries, gas) and pay the full balance before the due date every month. Keep your utilization under 30% of your limit. This builds a positive payment pattern that credit bureaus track.
Monitor your progress. Check your credit score every few months through free tools or your bank’s app. Watch for your new account being reported as R1. If you spot errors, dispute them with the credit bureau promptly.

The Bottom Line Getting credit during a consumer proposal is possible and, when done carefully, can actually speed up your financial recovery. A secured credit card is the safest and most effective tool for rebuilding. The key is to treat this period as a fresh start — not as an opportunity to borrow more than you can handle. Talk to your LIT, stick to your budget, and focus on building habits that will serve you well after your proposal is complete.

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Frequently Asked Questions

Can I legally get a credit card during a consumer proposal?

Yes, there is no law in Canada that prevents you from applying for or holding a credit card while in a consumer proposal. The Bankruptcy and Insolvency Act does not restrict you from obtaining new credit during this period. However, your R7 credit rating will make approval for unsecured cards very difficult. A secured credit card — where you provide a cash deposit as collateral — is the most realistic option and is widely available to Canadians in proposals. Always let your Licensed Insolvency Trustee know before you apply.

Will getting new credit affect my consumer proposal?

Getting new credit does not automatically affect or void your consumer proposal, as long as you continue making your agreed-upon proposal payments on time. Your proposal is a separate legal agreement with your existing creditors. However, if taking on new credit causes you to miss proposal payments, that’s where problems start — miss three payments and your proposal is automatically annulled, meaning your original debts are reinstated in full. The key is ensuring any new credit fits comfortably within your budget alongside your proposal payments.

How long does a consumer proposal stay on my credit report?

A consumer proposal remains on your credit report for three years after you complete it, or six years from the date it was filed — whichever comes first. For example, if you file a five-year proposal and complete it in full, the notation would be removed three years later (eight years total from filing). But if you pay it off early — say in three years — the mark clears three years after that (six years from filing). Paying your proposal off sooner directly reduces how long it impacts your credit. For more on rebuilding your credit, our guide covers practical steps.

What credit score do I need to get a secured credit card?

Most secured credit card issuers in Canada do not have a minimum credit score requirement, because the cash deposit you provide protects the lender from risk. This makes secured cards accessible even if your score has dropped significantly due to a consumer proposal. You will typically need to provide a deposit of $200 to $500 (which becomes your credit limit), proof of identity, and sometimes proof of income. Some issuers may also charge an annual fee. Compare several options before applying to find the best combination of low fees and credit bureau reporting.

Should I wait until my consumer proposal is finished to apply for credit?

It depends on your situation. If your budget is tight and you’re focused on making proposal payments, waiting until your proposal is complete is the safer choice. However, if you’re financially stable within your proposal and want to start rebuilding credit sooner, a secured credit card used responsibly can give you a head start. Many Canadians who actively rebuild during their proposal find they have a stronger credit profile when the R7 notation is eventually removed. The important thing is to only take on credit you can manage without jeopardizing your debt relief plan.