Consumer Proposal

Consolidate and Reduce Debt.
Stop Interest, Calls, and Garnishments.

Pros and Cons

Consumer Proposals aren’t a loan.  They are a legal payment arrangement that only Federally Licensed Insolvency Trustees can negotiate, and like most things, they have both advantages and disadvantages.

  The good:
  • Pay less than you owe – up to 70% less;
  • Stops interest;
  • Stops wage garnishments;
  • Stops creditor calls and bill collectors;
  • Consolidate your debts into a single monthly payment.
  • Repayment can be stretched over as many as 60 months to lower your monthly interest free payment;
  • Debtors keep their assets;
  • All debts are erased, including tax debt, with a few exceptions;
  • Your payment schedule is fixed regardless of what you earn. Surplus Income is not calculated in a Consumer Proposal;
  • A Consumer Proposal does not prevent you from sponsoring family and friends wishing to immigrate to Canada or affect your memberships and licenses, a key consideration for realtors, accountants, and lawyers;
  • Two counselling sessions are included in our fee; and
  • Damages your credit less than bankruptcy.
  The not so good:
  • Not all debts are erased (read more below);
  • Damages your credit;
  • You must be able to make monthly payments, or have family or friends willing to help.;
  • Creditors must approve your proposal; and
  • The proposal can fail if you fall 3 months behind.


Schedule your free, no-obligation consultation with one of our Federally Licensed Insolvency Trustees.  We’ll meet with you in person and discuss your unique personal situation.  We’ll explain your options, and help you make the best decision for your financial future.


Please note that everyone’s financial situation is different, and that the examples below are for illustrative purposes only.

Ashley, a mother of two, was unemployed for a period of time while she cared for her sick mother.  Her mother’s health strained her relationship with her then husband who she recently divorced.

She is now back to work, and earning $4,500 per month after taxes as an educational assistant, but she’s struggling with approximately $100,000 in unsecured lines of credit, credit card debt, and legal bills as a result of her unemployment and divorce.  She also receives a $600 monthly child tax benefit payment, and holds $10,000 in Registered Educational Savings Plan (RESP) investments on behalf of her two children.

Ashley was able to keep her RESPs while successfully reducing her debt to $30,000 payable in 60 interest free monthly installments of $500.00 per month.  Her budget accommodates these payments, and her creditors prefer it as it exceeds what they would realize if Ashley were to make an assignment in bankruptcy.

Franklin was a self employed tradesperson whose business failed 5 years ago.  He has since found full-time employment earning $3,000 per month, but he continues to struggle with the debt from his failed business.  He has a financed pickup truck, and RRSPs totaling $25,000.

He’s single, with no children, and successfully reduced his debt to $9,000 payable in 60 interest free monthly payments of $150.00 per month.

 Questions and Answers:

Can I afford to get started?

Yes. We offer free consultations and never charge up-front fees.  You simply make your agreed upon payment each month.

Is a Consumer Proposal a Consolidation Loan?

No. While both consolidate debt, Consolidation Loans involve a single lender paying off a number of your debts and requiring you to repay them 100% of the debts paid, plus interest.

Consumer Proposals were designed for people who can’t afford to repay 100% of their debts plus interest, and need to settle them for less than they owe.

Trustees don’t pay your creditors and then collect from you, they simply collect your money and forward it to your creditors as agreed.

How much do I need to pay to settle my debts through a Consumer Proposal?

Consumer Proposals typically provide for payment of 30%-50% of your debt and must generate more money for your creditors then bankruptcy.  Read more about the cost of a Consumer Proposal here.

What’s the process?

Becoming debt free begins with a free, no obligation initial consultation with a licensed Trustee in Bankruptcy where your Trustee will review your situation and explain your options.

If you make an informed decision to file a Consumer Proposal based on the facts provided by your Trustee:

  • Your creditors will be notified of your consumer proposal;
  • Your creditors have 45 days to vote on your proposal;

If creditors possessing more than 50% of your debt approve your proposal then all creditors are bound by it and the proposal moves forward.

If creditors possessing less than 50% of your debt approve your proposal then your proposal is deemed annulled.

While you are protected from your creditors during the voting process that protection ends in the event that your proposal is rejected by a majority of creditors. In other words your creditors can once again pursue you in the event that your proposal fails to be approved.

  • Deemed Court approval is granted unless a creditor objects within 60 days after you file your proposal;
  • You’ll attend two free credit counselling sessions with a credit counsellor registered with Industry Canada;
  • You’ll make payments to your Trustee as agreed-upon during your initial consultation; and
  • You’ll receive a certificate of completion upon making all payments to your Trustee and fulfilling all of your duties and thereafter you can focus on rebuilding your credit and enjoying your new debt free life.

Consumer Proposals are very flexible, but cannot:

  • Exceed 60 months in length; or
  • Provide less money to your creditors than they would receive if you declared bankruptcy.
Does filing a Consumer Proposal protect me from my creditors?

Yes.  Filing a Consumer Proposal is a legal action based upon Federal Law known as the Bankruptcy and Insolvency Act that prevents creditors from pursuing you any further. Once the Consumer Proposal is filed you will refer any creditor harassment to your Trustee in Bankruptcy who will deal with the creditor directly.  Read more about stopping garnishments here, and stopping creditor calls here.

I get to keep all of my assets?

Yes.  No assets are seized as a result of a Consumer Proposal.

Which debts aren’t erased?
  • Fines, penalties, and restitution orders imposed by a court in respect of an offence (including parking and speeding tickets);
  • Any debt arising out of a recognizance or bail;
  • Any award of damages by a court in a civil proceeding in respect of bodily harm intentionally inflicted, sexual assault, or wrongful death therefrom;
  • Any debt or liability for alimony or alimentary pension;
  • Unpaid spousal or child support;
  • Debt obtained by fraud (including E.I. over payments);
  • Debts not disclosed to the Trustee in Bankruptcy; and
  • Student debt relating to studies completed within seven years of the date of the Consumer Proposal.  Read our blog on this topic here.
What about tax debt?

Tax debt is erased upon the completion of your Consumer Proposal.  This includes unpaid income tax, HST, or payroll source deductions among all others.  Read more about Consumer Proposals and the CRA here.  Read about erasing your tax debt here.

What if my income increases after I file a Consumer Proposal?

Your payments under a consumer proposal are fixed and do not depend on your income as they do in a bankruptcy. Read more about surplus income here.

What happens to my credit rating?

You will have an R7 credit rating for 3 years after the completion of your Consumer Proposal. This is better than the R9 credit rating that stays on your credit report for 7 years after declaring bankruptcy.  Learn more about rebuilding your credit here, or obtaining your free credit report here.

Is creditor approval of my Consumer Proposal required?

Yes. Creditors holding 50% of your debt must agree to the terms of your Consumer Proposal. If approval from creditors representing 50% or more of your debt agree to the terms of your Consumer Proposal then the remaining creditors are legally bound as well.  This legal ability to force your creditors to accept or decline your Consumer Proposal as a group is unique to a Consumer Proposal filed in accordance with Federal Law.  Beware of other debt settlement strategies which allow individual creditors to sabotage your repayment efforts by continuing their independent collection efforts.

What happens if my creditors reject my proposal?

If your proposal is rejected by your creditors you are not automatically bankrupt.  Your creditors’ rights are revived and they can once again pursue you and attempt to collect any outstanding amounts.  If this occurs, your Trustee will discuss other debt settlement options including bankruptcy.

What happens if I miss 3 payments?

Your Consumer Proposal is annulled, your debts are not erased, and your creditors are once again able to pursue you.

A Consumer Proposal can be revived if your creditors agree, but this only occurs in rare cases.

The Consumer Proposal Library

Listed below are some of our most commonly read blog posts on specific issues related to Consumer Proposals.  If you’re unable to find the answer to your question, please use our website’s search feature or give us a call.  You’ll speak directly with a licensed Trustee in Bankruptcy who can answer your questions.

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