Consumer Proposal

What Is a Consumer Proposal?

A Consumer Proposal is a formal, legally binding agreement between you and your unsecured creditors to settle your debts for less than what you owe, usually paid back through a single manageable monthly payment over a period of time (up to five years). It is administered by a Licensed Insolvency Trustee (LIT) under federal laws in Canada and is designed as an alternative to personal bankruptcy, helping you get out of debt while protecting your assets and stopping most collection actions against you.

How Much Does a Consumer Proposal Cost?

The costs associated with a Consumer Proposal are federally regulated and are generally included in your monthly payments, not paid up front separately. They typically consist of:

A government filing fee
Trustee administrative fees
Counselling fees (usually for two required sessions)
A levy or percentage of funds distributed to creditors

Because there are no direct out-of-pocket fees when you file, the proposal is funded through the payments you make over time.

What Debts Are Included in a Consumer Proposal?

Consumer Proposals cover unsecured debts, including:

• Credit card balances
• Bank loans and lines of credit
• Payday loans
• Tax debts owed to CRA
• Some student loans ( if you’ve been out of school for more than 7 years)

Secured debts, such as mortgages or vehicle loans, are not included in the proposal (you must keep paying those to retain the assets).

Consumer Proposals vs Other Debt Relief Solutions

Compared with other debt solutions:

Bankruptcy: A Consumer Proposal is less severe. You can keep your assets and have more control, whereas Bankruptcy may involve selling assets and will affect your credit longer.

Debt Consolidation: Debt consolidation loans combine debts but don’t reduce what you owe; a Consumer Proposal reduces your debt and stops interest.

Informal Debt Settlement: Consumer Proposals are government-regulated and legally binding once approved, while informal settlements with your creditors are not.

How a Consumer Proposal Works

Meet with a Licensed Insolvency Trustee – We will review your finances and explain all debt relief options.

Develop and File the Proposal – Your LIT prepares the formal offer and files it with the Office of the Superintendent of Bankruptcy.

Creditor Vote – Creditors have ~45 days to accept or reject the proposal. If accepted by a majority, it becomes binding for all.

Make Payments & Counselling – You make agreed monthly payments and attend two mandatory financial counselling sessions.

Certificate of Full Performance – Once completed, you receive a certificate showing your obligations under the proposal are fully met.

Do You Qualify For a Consumer Proposal?

To file a Consumer Proposal in Canada you generally must:

• Be insolvent (unable to pay debts when due)
• Have unsecured debts between approximately $1,000 and $250,000 (excluding mortgages)
• Be a resident of Canada or own property here
• Have enough income to make the proposal payments

Pros and Cons of Consumer Proposals

Pros

• You may reduce the total debt you owe.
• Interest stops once the proposal is filed.
• Your assets, like your home or car, are usually protected. Collection actions stop, giving peace of mind.

Cons

• It affects your credit score – reflected as an R7 rating.
• Only unsecured debts are included.
• It’s a long-term commitment – up to 5 years.
• Creditors must accept the proposal for it to move forward.

Frequently Asked Questions about Consumer Proposals