Consumer Proposal Questions and Answers

A consumer proposal is a legally binding agreement, filed through a Licensed Insolvency Trustee, that lets you repay a portion of your debt over five years.

Your unsecured creditors agree to accept less than the full amount, and any balance remaining is forgiven. It is a formal option under the Bankruptcy and Insolvency Act, and it is the most common alternative to bankruptcy in Canada.

To qualify for a consumer proposal, you must owe at least $1,000 and no more than $250,000 in unsecured debt (not including a mortgage on your primary residence).

You must live in Canada or have assets in the country, and you have enough income to make a monthly payment. A Licensed Insolvency Trustee will confirm your eligibility during a free consultation.

Only a Licensed Insolvency Trustee can file a consumer proposal.

Meet a Licensed Insolvency Trustee for a free review of your income, debts and assets. If you are eligible to file, the trustee files your consumer proposal and notifies your creditors, who vote on it. It’s accepted if creditors holding over 50% of the dollar value of votes agree.

Once accepted, you make your payments, complete two short counselling sessions, and the remaining debt is eliminated upon completion.

The actual cost of a consumer proposal depends on what you owe, what you own, and what you can afford.

A consumer proposal allows you to settle your unsecured debt for less than the full amount, with payments made in fixed monthly installments over a period of up to five years. Once the proposal is filed, no interest accrues, so every payment reduces the balance.

Once you file your consumer proposal, interest stops immediately. The amount you agree to repay is fixed, which means it won’t increase over time, regardless of whether your income increases.

A consumer proposal can last for a maximum of five years. How long it takes depends on the monthly amount you agree to. Many people complete their proposal sooner by paying it off early, and there is no penalty for doing so.

Yes, you can pay the remaining balance at any time with no penalty, and many people do once their situation improves. Since there’s no interest, paying it off early means you can complete your consumer proposal sooner, which helps you rebuild your credit faster.

If you miss three payments on your consumer proposal, the proposal is cancelled (annulled). If you are struggling, contact your Licensed Insolvency Trustee before that happens. In many cases, the terms can be adjusted.

In most cases, you keep everything. A consumer proposal is based on your income, not the sale of your assets, so your home, vehicle, savings, and belongings normally stay with you. This is often the main reason people choose a proposal over bankruptcy. Your Licensed Insolvency Trustee will confirm how specific assets are treated.

Yes. In almost all cases, you keep your vehicle in a consumer proposal. As long as you continue making payments on your car loan or lease, you can retain it, since secured loans are separate from unsecured debts in the proposal.

A consumer proposal allows you to keep your home while addressing unsecured debts like credit cards and loans. You will continue to pay your mortgage as usual, and your home equity remains intact.

A consumer proposal appears on your credit report with an R7 rating, showing you are repaying debt under a formal agreement. It remains on your Equifax report for three years after completion or six years from the filing date, whichever is earlier. It’s not permanent, and you can rebuild your credit.

Yes. The moment a consumer proposal is filed, an automatic stay of proceedings begins, which stops most collection actions, wage garnishments, and lawsuits by unsecured creditors immediately.

Yes. Income tax and GST/HST debt owed to the Canada Revenue Agency is unsecured debt and can be included in a consumer proposal like any other. Filing also halts CRA collection actions, including wage garnishments and frozen accounts. The only exception is if the CRA registered a lien against your property before you filed. That secured claim is handled separately.

Government student loans can only be included in a consumer proposal if seven years have passed since you ceased being a full-time or part-time student. The time begins when you leave school, not when you took the loan.

Not for debts that are yours alone. Your spouse’s credit and finances are separate, and your consumer proposal does not appear on their credit report. The exception is joint debt or debt you guaranteed together, where both people are responsible. Your Licensed Insolvency Trustee will review any joint debts with you.

Deciding between a consumer proposal and bankruptcy depends on your specific financial situation.

A consumer proposal is the best choice if you have assets to protect and a stable income. Bankruptcy can be faster if you have little or no income and no assets.

The right choice depends on your income, assets and debts. Compare a consumer proposal vs bankruptcy.

A debt consolidation loan combines your debts into one new loan that you repay in full, with interest, and you need good credit to qualify.

A consumer proposal reduces the total you repay, charges no interest, requires no credit approval, and provides legal protection from creditors. They are designed for different financial situations.

The advantages of a consumer proposal include a single manageable monthly payment, no interest charges, the ability to retain your assets, and legal protection from creditors. However, the main disadvantage is its impact on your credit score. We present both sides honestly on our consumer proposal pros and cons guide.

It’s unlikely it will be rejected because your Licensed Insolvency Trustee will present a consumer proposal that satisfies your creditors. If changes are requested, the trustee can often negotiate new terms. If an agreement isn’t reached, the trustee will explore other debt relief options with you.

Creditors rarely ask for a meeting, and if no meeting is requested within 45 days, your consumer proposal is automatically accepted. If a meeting does take place, your Licensed Insolvency Trustee will attend with you and handle it. You do not deal with creditors on your own.