In this guide
What is a consumer proposal?
A consumer proposal is a formal debt relief option under the Bankruptcy and Insolvency Act that allows a person to make a deal with their unsecured creditors to repay them a percentage on the dollar of what they owe. This is typically done through monthly payments made over five years (60 months) and must offer creditors more than they would receive in a bankruptcy.
It’s managed by a Licensed Insolvency Trustee (LIT). It becomes legally binding once approved by creditors holding more than 50% of the debt, providing a structured way to repay debts based on affordability. Consumer proposals can only be administered by Licensed Insolvency Trustees.
Consumer proposals are the most commonly used insolvency option in Canada. In 2025, 78.4% of consumer insolvencies were consumer proposals.
How does a consumer proposal work?
A consumer proposal restructures your unsecured debt into one monthly payment based on what you can afford, not what you owe. The payment amount is fixed and never increases, even if your income rises.
Once filed, a Stay of Proceedings provides legal protection that immediately stops collection actions, freezes interest, and ends wage garnishments.
You keep your assets, including your home, car, savings and tax refunds. Upon completion, you are debt free.
How much does a consumer proposal cost?
The cost of a consumer proposal is based on what you can afford to pay, not the total amount you owe. A Licensed Insolvency Trustee reviews your income, assets, and what creditors would receive if you went bankrupt.
How much of your debt you repay varies from person to person. There’s no set figure, and anyone promising a specific reduction before looking at your finances is guessing. A trustee can determine the amount you would actually pay during your free initial consultation.
Is a consumer proposal worth it?
For most people with regular income and assets to protect, a consumer proposal is a safe option. You clear debt you can’t repay in full, your payments never change, and you keep your home, car and savings.
If you have almost no income or nothing to protect, bankruptcy may be cheaper and faster. A good rule of thumb is to consider whether you have any money left over each month after covering your essential expenses, as well as any valuable assets worth keeping.
A Licensed Insolvency Trustee will help you determine which option is best for your situation.
The pros and cons of a consumer proposal
There are numerous benefits. By entering a consumer proposal, you can reduce your total debt, make a fixed monthly payment, stop collection calls, freeze interest rates, and keep all of your assets.
However, there are also downsides. While the consumer proposal is in effect and for three years afterward, your credit will be impacted.
Additionally, you must have sufficient income to make the required payments, and the process generally takes longer than bankruptcy. Some debts can be included.
To learn more, see the pros and cons of a consumer proposal.
Consumer proposal vs bankruptcy
Choosing between a consumer proposal and bankruptcy depends on your financial situation. A consumer proposal is the best choice if you have assets to protect and a stable income.
Bankruptcy can be the better route if you have little or no income and few assets, because it’s often cheaper and can be over in nine months.
Discover all the differences between a consumer proposal and bankruptcy.
There are also alternatives, such as debt consolidation and non-profit credit counselling. To determine the best solution, arrange a free consultation with one of our Licensed Insolvency Trustees.
What debts can you include in a consumer proposal?
A consumer proposal eliminates most unsecured debts: credit cards, personal loans, payday loans, unsecured lines of credit, overdrafts, unpaid rent, income tax debt and older student loans. You must include all unsecured debts so creditors are treated equally.
Some debts cannot be included. Secured debts like your mortgage or car loan aren’t affected, and you keep those assets by keeping up the payments.
Property taxes, court fines, and child or spousal support can’t be included either, and student loans only qualify if it’s been seven years since you were in school. Tax debt can be included, as long as the CRA hasn’t already registered a lien on your property.
Learn more about how to file a consumer proposal.
Who can file a consumer proposal?
A consumer proposal is for people with less than $250,000 in unsecured debt, not including a mortgage on your primary residence. If you owe more than that, you can file a Division I proposal instead.
You also need to be insolvent, meaning you can’t pay your debts as they come due. You need enough income to make a monthly payment after your essential bills. Your offer must also give creditors more than they’d get if you went bankrupt, or they won’t accept it.
How to file a consumer proposal
A Licensed Insolvency Trustee files and manages your consumer proposal. They review your finances, work out an affordable payment, put the offer to your creditors, and handle the paperwork and counselling sessions.
Your creditors have 45 days to vote, and the proposal passes if creditors holding more than half of the debt agree. Most go through, and if creditors push back, your trustee can adjust the terms. Learn more about filing a consumer proposal.
Talk to a trustee about a consumer proposal
At Moses Advisory Group, our Licensed Insolvency Trustees have helped thousands of Canadians resolve their debt problems. To find out if a consumer proposal is right for you, speak to a Licensed Insolvency Trustee. The first consultation is free.
Frequently Asked Questions
How common are consumer proposals in Canada?
Consumer proposals made up 77.1 percent of Canada’s consumer insolvencies in the second quarter of 2026, far more common than bankruptcy. The share is even higher in Alberta, at 83.8 percent, as tracked in our quarterly Alberta insolvency statistics.
How will a consumer proposal affect my credit?
Like most debt repayment programs, a consumer proposal will lower your credit score. Your included accounts show an R7 rating while the proposal is active. It stays on your report for 3 years after you complete it, or up to 6 years from the filing date, whichever comes first. It isn’t permanent, and you can rebuild your credit.
Can I improve my credit score during a consumer proposal?
You can start straight away. A secured credit card used responsibly during the proposal puts an on-time payment record on your file, which lenders look for afterwards. Your score won’t improve significantly until the R7 rating and the consumer proposal are removed from your report.
How much debt can a consumer proposal include?
Up to $250,000 in unsecured debt, not including a mortgage on your primary residence. If you owe more than that, you can file a Division I proposal instead.
Will a consumer proposal be accepted?
Consumer proposals are usually accepted. Creditors have 45 days to vote, and it passes when creditors holding more than half the debt agree. Anyone who doesn’t vote counts as a yes. If creditors disagree, your trustee can amend the offer.
Does a consumer proposal affect my spouse?
No, unless you share a debt. Your spouse’s credit isn’t affected by your consumer proposal. A joint debt, like a shared credit card, is the exception, and you can deal with that together.
What happens if I miss a payment?
If you miss a consumer proposal payment, contact your trustee straight away. If you fall three payments behind, in any order, the proposal is cancelled, so don’t delay.
Can I pay off a consumer proposal early?
Yes, you can pay off a consumer proposal early with larger payments or a lump sum, and there’s no penalty for finishing ahead of schedule.
What happens when I finish?
Any remaining balance is forgiven, and your trustee releases you. You get a Certificate of Full Performance, which proves the debt is settled if a collector ever contacts you again.
When you finish, any remaining balance is forgiven, and your trustee will release you from your debts. You will receive a Certificate of Full Performance, which serves as proof that your debt has been settled in case a debt collector contacts you again.
