Consumer Proposal Canada
A consumer proposal is a legal debt relief option that may allow you to reduce the amount you repay while keeping assets such as your home, vehicle, and personal belongings.
For many Canadians, the biggest relief is knowing what comes next. A consumer proposal is a debt relief option governed by Canadian law. It is not a loan and it is not a private debt settlement. It is a legal process that can reduce the amount you need to repay. You repay the reduced amount based on what you can realistically afford.
Consumer proposals are available only through a Licensed Insolvency Trustee (LIT), who are regulated by the federal government. Once filed, a consumer proposal immediately stops most collection calls and wage garnishments.
Consumer Proposal at a Glance
Debt type
Unsecured debt
Payment structure
Fixed structured payments
Length
Up to 5 years
Interest
Stops applicable debt
Legal protection
Yes
Asset protection
Usually yes
Filed by
LIT
Credit impact
Yes, temporary
What is a consumer proposal?
A debt relief option that can reduce what you owe
A consumer proposal is a legally binding agreement between you and your creditors under the Bankruptcy and Insolvency Act.
It can allow you to settle unsecured debt for less than the full amount owed while making affordable structured payments.
A LIT reviews your finances, prepares the proposal, and presents it to your creditors. If most of your creditors accept the proposal, it becomes legally binding on all of them.
Consumer proposals are commonly used to address
- Credit card debt
- Lines of credit
- Payday loans
- Personal loans
- Tax debt
Once the proposal is filed, interest stops and collection actions are frozen.
How Does a Consumer Proposal Work?
1. Meet with a Licensed Insolvency Trustee: Review income, expenses, debts, and assets.
2. Create your proposal: A repayment offer is prepared based on what you can afford.
3. File the proposal: Legal protection begins and collection action stops.
4. Creditors vote: Creditors have 45 days to accept or reject it.
5. Make fixed payments: You make fixed, affordable structured payments.
6. Complete counselling sessions: Two financial counselling sessions are required (One for credit recovery and one for financial planning).
7. Finish the proposal: Once completed, included debts are legally resolved.
Who Can File a Consumer Proposal?
Eligibility Requirements
To qualify, you must:
- Owe $250,000 or less in unsecured debt (excluding your mortgage)
- Be insolvent, meaning you cannot pay debts as they come due
- Live in Canada or own property in Canada
Insolvent does not mean unemployed. Many Canadians who file consumer proposals are working and paying bills, but can no longer manage their debt in full.
Advantages of a Consumer Proposal
Key Benefits
Consumer proposals are a common debt relief option in Canada because they can reduce debt while helping you repay what you can afford.
Reduced Debt
A consumer proposal can reduce the amount you need to repay, depending on your financial situation and what your creditors accept.
Asset Protection
In many cases, a consumer proposal allows you to keep assets such as your home, vehicle, RRSPs, and personal belongings.
Legal Protection
The stay of proceedings protects you from applicable creditor action while the proposal is in place.
Predictable Payments
Your payments are based on what you can afford and stay the same unless you request a change.
Consumer Proposal Calculator: How Payments Are Determined
Many people assume a consumer proposal payment is based on a fixed formula or percentage of debt. In reality, every proposal is based on your unique financial situation. A Licensed Insolvency Trustee reviews factors such as your income, living expenses, assets, and total debt before determining an offer that is fair to both you and your creditors. Understanding these factors can help you estimate what your monthly payments may look like and why consumer proposal amounts can vary from one person to another.
You Pay:
$6,000
You Save:
$0
Consumer Proposal (0% Interest Rate)
You Pay:
$6,000
You Save:
$0
Debt Consolidation (12% Interest Rate)
You Pay:
$8,008
Do Nothing (19% Interest Rate)
You Pay:
$9,339
Credit Impact and Recovery
During and After a Proposal
A consumer proposal affects your credit, but ongoing missed payments and collection activity can have a greater long-term impact.
- Removed three years after completion or six years from filing, whichever comes first
- A consumer proposal is reported as an R7 credit rating while the proposal is active.
Many Canadians start rebuilding their credit during the proposal by following a budget and using credit responsibly.
Is a Consumer Proposal Right for You?
Who It's For
A consumer proposal may be a good option if you:
- Have steady income
- Carry unsecured debt
- Want to protect assets
- Need legal protection from creditors
Speaking with a LIT can help you understand whether a consumer proposal or another debt relief option is right for you.
The truth about debt
Frequently asked questions
Ready to learn if a consumer proposal is right for you?
Contact Farber for a free, confidential consultation with a Licensed Insolvency Trustee. We’ll review your situation and explain all your options, clearly, respectfully, and without pressure.
Find a Consumer Proposal Solution Near You
Filing a consumer proposal works the same across Canada, but every province has its own considerations — from cost of living to local creditors and court procedures.
Learn more about what a consumer proposal looks like where you live:
For more than 45 years, we’ve helped over 200,000 people get out of debt
We’ll meet to discuss your debt-relief options, guide you to the best solution, and assist you in building a better relationship with money. We’re here when you’re ready.