In this guide
How to file a consumer proposal
Filing a consumer proposal is a step-by-step process that’s governed by the Bankruptcy and Insolvency Act.
1. Check if a consumer proposal is right for you
A consumer proposal may be suitable for those with a stable income who are struggling with debt problems such as falling behind on bills, making only minimum payments on credit card debt, relying on payday loans, or being contacted by collection agencies.
You must owe between $1,000 and $250,000 in total unsecured debt (excluding your mortgage) to qualify. If your total debt exceeds $250,000, you would need to file a Division I proposal instead.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 66.11
A consumer proposal is often a better choice than bankruptcy if you can afford monthly payments and want to protect assets like home equity or an RRSP.
Unlike bankruptcy, a consumer proposal does not require surplus income payments if your earnings increase.
2. Gather your financial information
Before meeting with a Licensed Insolvency Trustee, gather a complete list of your creditors and amounts owed. The easiest way is to find statements from each creditor or check your credit report.
You will also need documentation of your income, monthly expenses, and assets, including pay stubs, bank statements, tax returns, and property information.
3. Find a Licensed Insolvency Trustee
To file a consumer proposal, you must work with a Licensed Insolvency Trustee, a professional licensed and regulated by the Office of the Superintendent of Bankruptcy.
Source: Government of Canada – Office of the Superintendent of Bankruptcy, Consumer Proposals
A Licensed Insolvency Trustee is the only professional authorized to file a consumer proposal, offer creditor protection, and legally release you from your debts.
Initial consultations are free. You do not need to pay a third party or a debt relief company to prepare documents in advance.
4. Attend your initial consultation
Bring all information about your debts. Your Licensed Insolvency Trustee will review your financial situation, including your debts, income, expenses, and assets.
If a consumer proposal is a good fit, your trustee will propose a monthly payment to your creditors.
To ensure the consumer proposal goes ahead, your offer must give unsecured creditors more than they would receive if you declared bankruptcy while remaining affordable based on your income.
You can file a joint consumer proposal if you and your spouse share most of the same joint debts.
Required documents and forms
Filing a consumer proposal requires specific documents mandated under the Bankruptcy and Insolvency Act.
Form 79: Statement of Affairs
Form 79 is a sworn statement disclosing your complete financial situation, including all assets and their values, all debts and creditors, income sources, reasons for financial difficulties, and any previous insolvency filings.
As of September 16, 2024, the Office of the Superintendent of Bankruptcy implemented updated versions of Form 79 with revised categories for assets and liabilities.
Source: Government of Canada – Statement of Affairs
Form 65: Income and expense statement
Form 65 documents your monthly household income and expenses, including net income, housing expenses, living expenses, transportation costs, and insurance payments.
Source: Government of Canada – Guidance for Completing Form 65
Documents checklist
- Government-issued identification
- Proof of income
- List of all creditors with account numbers and balances
- Bank statements from the past three months
- Mortgage or rental agreement
- Vehicle registration and loan documents
- Investment and RRSP statements
Filing your consumer proposal
Once your paperwork is complete, your Licensed Insolvency Trustee files your consumer proposal with the Office of the Superintendent of Bankruptcy and notifies your creditors.
When you file, you must surrender your existing credit cards to your Licensed Insolvency Trustee. You cannot apply for new unsecured credit while making proposal payments.
Some people obtain a secured credit card during this time to begin rebuilding their credit history.
Immediate creditor protection
A Stay of Proceedings begins the moment your consumer proposal is filed, providing immediate automatic protection from your creditors. Collection calls and legal action stop, and wage garnishments are lifted.
Secured creditors cannot change the terms of your mortgage or vehicle loan simply because you filed a consumer proposal.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 69.2
Credit rating impact
Like most debt repayment programs, filing a consumer proposal will damage your credit score and be recorded on your credit report.
Every credit account is assigned a rating code from 1 (best) to 9 (worst).
Each creditor will update the credit account’s rating code to 7, with a rating code description indicating that the account was included in a consumer proposal.
Revolving credit accounts (such as credit cards) are reported as R7, and installment credit accounts (such as loans) are reported as I7.
Equifax and TransUnion remove a consumer proposal from your credit report 3 years after completion or 6 years from filing, whichever comes first.
Source: Government of Canada and Equifax Canada
Tax considerations
A consumer proposal provides tax debt relief by including Canada Revenue Agency debts.
Before entering into a consumer proposal, you must file all outstanding tax returns so the CRA knows what you owe.
Keeping your assets
In a consumer proposal, you keep your assets. The value of your assets is factored into your proposal offer instead.
Your Licensed Insolvency Trustee considers the equity in your home, the value of your car, and other assets when calculating an offer your creditors will accept.
The creditor voting process
Once your creditors are notified of your consumer proposal, they have 45 days to review your offer and respond.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 66.18
The 45-day review period
You do not make any proposal payments during this review period. No interest is charged, and no additional fees apply.
Your proposal is automatically accepted if no creditor meeting is held within the 45-day period.
When a creditor meeting is called
A creditor meeting is requested when the Official Receiver calls one, or when creditors holding at least 25% of your total debt request a meeting.
At this meeting, creditors vote to accept, refuse, or request changes to your consumer proposal.
How voting works
Creditors vote based on the dollar value of their claims. When unsecured creditors representing more than 50% of your total debt vote in favour, creditors accept your proposal. If a creditor does not respond, their silence counts as acceptance.
Source: Government of Canada – Office of the Superintendent of Bankruptcy, Consumer Proposals
Once accepted, the court approves your consumer proposal after 15 days unless a court hearing is requested. Once approved, your consumer proposal becomes a legally binding agreement with all your creditors.
Source: Bankruptcy and Insolvency Act, Section 66.22
If your consumer proposal is rejected
Most consumer proposals are approved. If your creditors do not accept your proposal, your Licensed Insolvency Trustee may negotiate alternative terms or recommend other debt relief options.
Making payments and completing your consumer proposal
If your consumer proposal is accepted, you make monthly proposal payments as agreed. A consumer proposal can last up to 60 months (5 years).
Source: Bankruptcy and Insolvency Act, Section 66.12(5)
Payment options
You can pay through monthly payments, a lump-sum payment, or a combination of both. No interest is applied. Your monthly payment stays the same regardless of changes in your income.
Credit counselling requirements
As part of the consumer proposal process, you must attend two credit counselling sessions covering budgeting, rebuilding credit, and responsible credit use. Your Licensed Insolvency Trustee arranges these sessions.
Your responsibilities during the consumer proposal
During your consumer proposal, you must make all proposal payments on time, attend all required meetings, complete both credit counselling sessions, and notify your trustee if you move or change jobs.
Staying up to date with payments is absolutely crucial. If you miss three scheduled payments, your consumer proposal is deemed annulled, meaning the legal protection ends and creditors can resume collection action.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 66.31
How long does a consumer proposal take from start to finish?
| Phase | Duration |
|---|---|
| Initial consultation | 1 to 2 hours |
| Document gathering | 1 to 7 days |
| Filing with OSB | Same day as signing |
| Creditor review period | 45 days |
| Court approval (if accepted) | 15 days after acceptance |
| Proposal term | Up to 60 months |
You can file a consumer proposal within a few days of your initial consultation. The speed depends on how quickly you can gather your documents.
A consumer proposal cannot take longer than five years to complete. Many people complete their proposals earlier by making larger payments. There is no penalty for paying off your consumer proposal early.
Completing your consumer proposal
Once you make all your proposal payments and fulfill your obligations, you receive a Certificate of Full Performance. This certificate confirms the forgiveness of all debts included in the proposal, leaving you debt-free.
If you receive any calls from collection agencies after completion, provide them with a copy of your Certificate of Full Performance.
Source: Government of Canada – Form 57: Certificate of Full Performance of Consumer Proposal
What’s the first step to filing a consumer proposal?
A consumer proposal allows you to repay your creditors what you can afford rather than what you owe. A Licensed Insolvency Trustee guides you through every step of the process.
As with every debt relief solution, there are pros and cons to a consumer proposal. Be sure to research all options available to you.
A free consultation with a Licensed Insolvency Trustee will help you understand which debt relief option fits your financial situation and help you get back on track.
At Moses Advisory Group, our Licensed Insolvency Trustees have helped Canadians just like you become debt-free.
To find out if a consumer proposal is right for you, speak to a Licensed Insolvency Trustee for free by video, phone or in person.
Find the right solution for your debt
Get free, honest debt advice from a Licensed Insolvency Trustee by video, phone or in person.
- Eliminate up to 80% of debt
- One monthly payment
- Stop collection calls
- Stop wage garnishments
- Freeze interest
or call 1-587-701-5681
* Up to 80% reduction depending on your situation.
Frequently asked questions
Where do I file a consumer proposal?
You file a consumer proposal through a Licensed Insolvency Trustee. The trustee files your proposal electronically with the Office of the Superintendent of Bankruptcy. You do not file directly with the government yourself.
Can I file a consumer proposal online?
The initial consultation with a Licensed Insolvency Trustee can be done by video call. Document signing and filing are handled electronically.
While you cannot file a consumer proposal entirely online on your own, the process can be completed remotely. No in-person visit is required.
When should I file a consumer proposal?
Consider filing a consumer proposal when you cannot afford to repay your debts in full but have a steady income to make reduced monthly payments.
A consumer proposal is often appropriate when debt consolidation loans are not available to you or when you want to avoid filing for bankruptcy.
How much does a consumer proposal cost?
There are no upfront fees to file a consumer proposal. Your Licensed Insolvency Trustee’s fees are included in your monthly payments and are regulated by the federal government.
How long does a consumer proposal stay on my credit report?
Equifax and TransUnion remove a consumer proposal from your credit report 3 years after you complete it, or 6 years from the date you filed, whichever comes first.
Source: Government of Canada – How long information stays on your credit report
What debts are included in a consumer proposal?
A consumer proposal covers most unsecured debts, such as credit cards, lines of credit, personal loans, payday loans, and income tax debt.
A consumer proposal does not include secured debts such as mortgages or car loans, student loan debt that is less than 7 years old, child support, or court fines.
Source: Government of Canada – Bankruptcy and Insolvency Act, Section 178(1)
What happens to my car loan and mortgage payments?
Secured debts, such as your car loan and mortgage payments, are not included in a consumer proposal. You continue making these payments as usual. Secured creditors retain their claim on the asset. If you want to keep your car or home, you must stay current on those payments.
Filing a consumer proposal frees up money you were spending on unsecured debt, making it easier to keep up with mortgage and vehicle loan obligations.
How does a consumer proposal affect my credit score differently from bankruptcy?
Both a consumer proposal and personal bankruptcy affect your credit report.
Revolving credit accounts in a consumer proposal typically appear with an R7 rating, while in bankruptcy, they appear as an R9.
A consumer proposal remains on your credit report for 3 years after completion or 6 years from filing, whichever comes first. A first bankruptcy stays on your report for 6 to 7 years after discharge.
The impact of a consumer proposal on your credit report is similar to bankruptcy and can make it difficult to borrow money. However, a consumer proposal has a shorter credit impact than bankruptcy while still eliminating debt.
Source: Government of Canada – How long information stays on your credit report
A secured credit card, backed by a cash deposit, is typically the most practical option for rebuilding credit while you complete your payments.
Maintaining good payment history on secured debts during a consumer proposal can help rebuild credit afterward.
