End debt stress with a Consumer Proposal! Pay back less of your debt, stop interest/calls, keep your assets, and get a fast financial fresh start.
For many Canadians facing overwhelming debt, the financial future can look bleak. Collection calls are constant, interest rates are punishing, and the stress impacts every part of life. While the option of personal bankruptcy exists, it often carries a heavy emotional weight and potential loss of assets.
Fortunately, there is a powerful, government-regulated alternative that allows you to reduce your unsecured debt, consolidate payments, and achieve financial freedom without filing for bankruptcy: the Consumer Proposal.
A Consumer Proposal is rapidly becoming Canada’s most popular debt-relief solution for a reason. It is a structured, legally binding agreement that offers a path out of the struggle. If you are struggling to service your debts but can afford to pay back a portion of what you owe, this solution is a lifeline.
A Consumer Proposal is a formal, legally binding offer made by you to your unsecured creditors to repay a percentage of the debt you owe, over a period of time up to a maximum of five years. This entire process is administered and managed by a Licensed Insolvency Trustee (LIT).
The LIT is the only professional legally authorized in Canada to file a Consumer Proposal on your behalf. They act as your representative, negotiating with creditors to ensure the proposal is fair for both you and those you owe money to.
To be eligible to file a Consumer Proposal, you must meet a few key requirements:
The appeal of a Consumer Proposal lies in the significant advantages it offers over other debt solutions:
This is the core benefit. You propose to pay back only a portion of your unsecured debt—often between 20% and 50% of the total amount owed. Once the proposal is accepted, that is all you will ever have to pay. Furthermore, it consolidates all your included debts into one single, manageable monthly payment made to your LIT.
Once your proposal is filed, a critical legal benefit takes effect: all interest on the debts included in the proposal immediately stops accumulating. You will be paying down the principal only, ensuring that 100% of your payment goes towards reducing the debt and expediting your fresh start.
As soon as your LIT files the Consumer Proposal with the Office of the Superintendent of Bankruptcy (OSB), a legal action known as the “Stay of Proceedings” is enacted. This is a court order that:
Unlike personal bankruptcy, a Consumer Proposal allows you to retain all of your assets. You keep your home, your car, your investments, and your Registered Retirement Savings Plans (RRSPs). This is a game-changer for individuals and families who have equity in their property or significant savings but need relief from consumer debt.
In a bankruptcy, if your income rises above a government-set threshold, you are required to pay a portion of that “surplus income” into your bankruptcy estate. In a Consumer Proposal, your agreed-upon monthly payment is fixed. If you get a raise or a bonus at work, your payment does not change, offering certainty and rewarding hard work.
While any formal insolvency will affect your credit score, a Consumer Proposal generally has a less severe impact than bankruptcy. It is removed from your credit report three years after your final payment is made, or six years from the date of filing, whichever is sooner. This allows you to start rebuilding your credit sooner than in a typical second-time bankruptcy scenario.
Filing a Consumer Proposal is straightforward, but it requires the expert guidance of a Licensed Insolvency Trustee.
Your first step is a free, confidential consultation with an LIT. The LIT will review your entire financial picture—your income, monthly expenses, total debt, and the value of your assets. They will determine what you can realistically afford to pay and calculate the minimum amount your creditors are likely to accept.
The LIT will help you structure a proposal—the formal offer to your creditors. This proposal will detail the total amount offered and the payment schedule (e.g., $300/month for 60 months). Once you sign the documents, the LIT files the proposal with the OSB, and the powerful Stay of Proceedings takes effect.
The LIT sends a copy of the proposal to all your unsecured creditors. Creditors have 45 days to vote on whether to accept or reject the offer. The vote is decided by a simple majority in dollar value of the proven claims. For example, if you owe $50,000 to five creditors, and one creditor to whom you owe $26,000 votes ‘Yes’, the proposal is accepted.
You begin making your single, monthly payment to the LIT. The LIT holds the funds and distributes them to your creditors. You are also required to attend two mandatory financial counselling sessions with your LIT, focusing on budgeting and rebuilding a solid financial future.
Once you have made all your required payments, your LIT issues a Certificate of Full Performance. This legally releases you from all the debts included in the proposal. You are officially debt-free, and your financial fresh start is complete!
It’s important to know which debts a Consumer Proposal addresses:
| Debts Included (Unsecured) | Debts Excluded (Secured/Non-Dischargeable) |
| Credit Card Balances | Secured Debts (Mortgages, Car Loans – unless you surrender the asset) |
| Lines of Credit & Bank Overdrafts | Child Support or Spousal Support Arrears |
| Tax Debt (CRA) | Court Fines and Penalties |
| Payday Loans | Debts arising from fraud |
| Outstanding Utility Bills | Student Loans (if you have been out of school for less than seven years) |
| Money Owed to Friends/Family |
If you have a secured debt, like a mortgage, and wish to keep the asset, you must continue making those payments outside of the Consumer Proposal. The proposal only addresses your unsecured debt burden.
If you are ready to take control of your financial life, stop the collection calls, and secure a brighter future, a confidential, zero-obligation consultation with a Licensed Insolvency Trustee is the first and most crucial step. You don’t have to face your debt alone.
