Self-Employed or Freelancing? What to Know About Consumer Proposals

If you’re self-employed or freelancing, you’ve probably had those months: when the invoices are late, the tax bill hits hard, and the credit card keeps picking up the slack. You’re juggling clients, chasing payments, and trying to stay afloat.

Sound familiar? You’re not alone.

Many self-employed Canadians find themselves juggling debt with no idea how to get out from under it. The good news? Consumer proposals for self-employed individuals offer a way forward.

What Is a Consumer Proposal?

If debt’s been piling up and you’re unsure what your options are, a consumer proposal might be the solution that finally gives you room to breathe.

Basic Overview and How It Works

A consumer proposal is a formal agreement that lets you hit reset on your debt — without having to pay back the full amount. Instead, you commit to paying a portion of what you owe, in a way that actually fits your budget.

To get started, you’ll work with a Licensed Insolvency Trustee (LIT): a federally regulated debt expert who’s trained and approved by the Canadian government. Your LIT will take a close look at your finances and help you put together a repayment plan that makes sense for your situation.

Most consumer proposals involve monthly payments stretched out over a period of up to five years. Some people finish earlier, in three or four. Either way, the goal is to keep things predictable and affordable.

Differences from Bankruptcy

Unlike bankruptcy, you keep your assets (like your car or business equipment), and you don’t face the same level of credit score impact. For entrepreneurs and freelancers, that can mean continuing to operate your business while working toward being debt free.

Are Self-Employed Canadians Eligible?

Yes! Whether you’re a freelance graphic designer, a real estate agent, or a sole proprietor running your own consulting business, consumer proposals for self-employed Canadians are absolutely an option.

How Income and Assets Are Considered

Here’s the thing: self-employment income can be unpredictable.

One month you’re raking it in and the next, it’s radio silence. A Licensed Insolvency Trustee understands that and will look at your income on an average basis — not just your best or worst month.

They’ll also review your business assets (like tools or a laptop) and figure out how they play into the picture. Most of the time, you won’t need to sell anything to start the settlement process.

CRA and Tax Debt Inclusion

Here’s one of the most common questions: Can CRA debt be included in a consumer proposal?

Absolutely. That’s one of the most powerful benefits of this solution. Whether you owe income tax, GST/HST, or payroll deductions, CRA consumer proposal settlements are possible. Once your proposal is filed, the CRA must stop collection actions — including wage garnishments and bank freezes.

Key Benefits for Freelancers and Entrepreneurs

With a consumer proposal for self-employed Canadians, there’s more protection here than you might think.

Legal Protection from Creditors

As soon as your consumer proposal is filed, you get something called a “stay of proceedings.” That means all those calls from collection agencies, emails, and threats of legal action? They stop, immediately.

Creditors are legally required to communicate with your LIT instead.

Avoiding Business Bankruptcy

Unsurprisingly, filing for bankruptcy can make it harder to keep your business going. It might mean losing essential tools and equipment, damaging your credit, or even closing your doors.

But it’s not your only option.

A consumer proposal gives you the chance to deal with personal debt without putting your business at risk. You can keep working without having to start from scratch.

What You’ll Need to Prepare

Getting organized upfront can make the process much smoother and less stressful.

Business Records and Tax Filings

Before filing a proposal, your LIT will need a clear view of your financial picture. That means you’ll need to provide them with:

• Recent tax returns
• Business income and expense statements
• A list of creditors and debts
• Bank statements for your personal and business accounts

Keeping good records will help speed up the process and help your LIT build the strongest proposal possible.

Proof of Income Variability

You’ll also need to demonstrate how your income fluctuates. This could include:

• Invoices and payment records from clients
• Contracts or agreements for ongoing work
• A breakdown of your average monthly income over the last 6–12 months

Don’t worry if it feels messy, most self-employed folks aren’t walking around with a perfect spreadsheet. Your Trustee will help you organize what you have.

Working with a Licensed Insolvency Trustee

You won’t be doing this alone — your Trustee will guide you through every step with expert support.

What to Expect from the First Consultation

Your first meeting with a LIT is free, confidential, and pressure-free. They’ll review your situation and walk you through all your options, like including debt consolidation, budgeting help, and yes, consumer proposals.

They’ll also answer your big questions, like:

• Can I file a consumer proposal? (Which the answer is yes!)
• Will I lose my clients or business contracts? (Unlikely.)
• What happens after filing a consumer proposal? (Here’s a full breakdown.)

If a proposal is the best fit, they’ll help you get started right away.

You Deserve a Fresh Start

Being your own boss doesn’t mean you have to carry your debt alone.

Debt relief for entrepreneurs exists and consumer proposals are one of the most effective and respectful ways to get there.

They allow you to regain control of your business finances, make manageable monthly payments to settle your debt, and protect what you’ve built.

If you’re facing debt and wondering if a consumer proposal could work for you, let’s talk.

Book a free consultation with a Licensed Insolvency Trustee today and find out what’s possible.