Consumer proposal FAQs.

A consumer proposal is a legal repayment agreement negotiated with your creditors to settle unsecured debts such as credit cards, income tax, and payday loans. In Canada, consumer proposals can only be administered by a Licensed Insolvency Trustee, who will work with you to offer creditors a percentage of what’s owed and/or adjust repayment terms based on what you can afford.

A consumer proposal is paid over a maximum of five years. If you’re able to, you can make larger, lump sum, or more frequent payments to finish the proposal faster.

As long as you don’t have joint debt, your family won’t be affected by your consumer proposal. If your spouse has co-signed or endorsed your debt, they’ll be equally responsible or solely responsible for maintaining payments after you file. 

Children aren’t affected by a proposal, and you’ll continue to receive child benefit payments (if applicable). RESPs, however, aren’t a protected asset in some provinces, and can be seized to pay down your debt.

Yes, once you file your consumer proposal, all collection efforts on included debt stop. When you file, a “stay of proceedings” is issued, which legally prevents debt collectors from continuing any collection activity—including wage garnishment.

It may take creditors six to eight weeks to stop collection attempts, but your trustee will handle communication with them on your behalf. If a creditor continues to contact you, let your trustee know, and they’ll follow up directly.

Both bankruptcy and consumer proposals provide a way to alleviate your debt, but they differ in the assets you can keep, repayment structure, duration, filing process, and impact on your credit rating.

If you can afford payments but need a modified arrangement, want to keep your assets, or want to minimize the impact on your credit rating, a consumer proposal might suit you best. On the other hand, bankruptcy can eliminate overwhelming debt for people who struggle to meet their financial obligations in as little as nine months, though it may affect your credit rating and, in some cases, your assets. Our blog explains the differences between bankruptcy and consumer proposals.

Debt consolidation and consumer proposals are both ways to simplify debt payments. Consolidation loans are typically arranged through a lender, like a bank, and combine multiple debts into one monthly payment. However, since they’re loans, they may come with high interest rates and fees—and you’ll repay 100% of the debt.

Consumer proposals, on the other hand, are administered by Licensed Insolvency Trustees. They also combine your unsecured debts into lower monthly payments, but with 0% interest. In addition, they stop all collection activities on included debt and can reduce your unsecured debt by up to 80%. Our blog explains the differences between a consumer proposal and a consolidation loan.

Credit counselling is a service that helps individuals manage their debt and improve their financial situation. Credit counsellors offer advice on budgeting, debt repayment strategies, and financial planning. They can also negotiate with creditors on behalf of clients to reduce interest rates or create manageable payment plans. However, they can’t administer formal debt solutions like consumer proposals.

Yes. If you’re able to keep up with your payments and repay any equity owed, assets like your home and car won’t be affected by a consumer proposal.

A consumer proposal will settle all unsecured debts, including (but not limited to):

• credit cards
• personal lines of credit
• personal loans
• payday loans
• income taxes
• past-due utility bills

A consumer proposal doesn’t cover secured debts, such as your mortgage or car loan. It also excludes court-imposed fines or payments, like alimony or child support. Student loans and apprenticeship loans can only be included if you’ve been out of school or completed your apprenticeship at least seven years before filing.

When you file a consumer proposal, you're generally required to surrender any credit cards with a balance owing to your trustee. These cards are then closed, and the debt is included in your proposal. You won’t be able to use those credit cards during your proposal, but you may be able to get a new one with a small limit, such as a secured credit card.

When you file a consumer proposal, it’s added to your credit report with an R7 rating. Canada’s two credit bureaus—Equifax and TransUnion—will remove the proposal from your report either three years after you complete it or six years from the date you signed it, whichever comes first.

You might have too much debt if you struggle to make minimum payments, rely on credit to cover basic expenses, or feel overwhelmed by your financial obligations. Common warning signs include missing payments, maxing out credit cards, or borrowing from one source to pay another.

Technically—yes—you can pay off your proposal early. The payment terms are designed to fit your budget, but you still have the option to increase the amount or frequency of your payments. If your financial situation improves, you can also pay off your proposal in a lump sum. The sooner it’s paid off, the sooner you can start rebuilding your credit. Just be careful not to overextend your finances in an effort to pay it off early.

Generally, all costs associated with filing a consumer proposal—such as the filing fee, counselling fee, and administration fee—are included in your monthly proposal payment. The Office of the Superintendent of Bankruptcy (OSB) sets and regulates all fees for Licensed Insolvency Trustees across Canada. All trustees offer free consultations and don’t charge any upfront fees.

If you miss multiple payments or stop making your consumer proposal payments, the proposal can be annulled. This means your creditors may resume collection efforts for any remaining debt.

Any funds you've already paid into the proposal are held in trust by the Licensed Insolvency Trustee and distributed to creditors proportionally, based on what was received before the annulment.

The “statute of limitations” refers to the time limit for creditors to collect debts. If no payments are made or the debt isn’t acknowledged within this period, creditors can’t take legal action to collect it. This time limit varies by province. In Alberta and Ontario, the statute of limitations is two years, and in Quebec it’s three. In Manitoba, New Brunswick, Newfoundland and Labrador, Prince Edward Island, and the territories it’s six years. Some debts—including secured debts, student loans and government debts—aren’t affected by these limitations.

Licensed Insolvency Trustees (LITs) are the only professionals in Canada who can administer formal debt solutions, such as bankruptcy and consumer proposals. The Office of the Superintendent of Bankruptcy Canada (OSB) and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) regulate LITs and hold them to a strict code of ethics and professional conduct.

To become an LIT in Canada, candidates must complete an academic program and written exam administered by CAIRP. They must also pass an oral board examination with the OSB and complete insolvency counselling training. Only after candidates meet all educational, testing, and character requirements are they licensed to practice as LITs.

No, only a Licensed Insolvency Trustee can administer consumer proposals in Canada. They’re the only professionals regulated and authorized by the federal government to offer formal debt solutions like consumer proposals.

Yes, two organizations regulate Licensed Insolvency Trustees in Canada. The first is the Office of the Superintendent of Bankruptcy (OSB), the federal agency that oversees the Bankruptcy and Insolvency Act and the insolvency profession. The second is the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), which serves as the professional standards organization for insolvency professionals in Canada. Both the OSB and CAIRP ensure that LITs follow strict standards, ethics, and guidelines to protect the interests of both debtors and creditors.

Similar to a Licensed Insolvency Trustee, a debt consultant offers advice and strategies to help manage, repay, and potentially reduce debt. However, their debt management plans, fees, and standards aren’t regulated by the government, and they can’t guarantee the same protections against collection activities.

A Licensed Insolvency Trustee doesn’t charge upfront fees, can stop collection activities, reduce debt by up to 80%, and is the only professional authorized to administer both bankruptcies and consumer proposals.

A Licensed Insolvency Trustee’s fees are included in your monthly bankruptcy or proposal payments. These fees are set and regulated by the Office of the Superintendent of Bankruptcy Canada—the federal agency that oversees the Bankruptcy and Insolvency Act and the insolvency profession.

To successfully complete a consumer proposal, you must make all required payments as agreed, attend two financial counselling sessions, and meet any other conditions set by your trustee. Once completed, you’ll receive a Certificate of Full Performance as proof that all proposal requirements have been met.

Once your consumer proposal is complete, you're no longer obligated to repay the debts included in it. That means you’re not responsible for any remaining balances, and those creditors can’t take legal action against you to collect them.

Your proposal will stay on your credit report for three years after completion or six years from the date you signed it—whichever comes first—and your credit score will be affected. However, once you’ve been discharged, you can begin rebuilding your credit and developing positive financial habits.

Rebuilding your credit after a consumer proposal takes time. You can start by getting a secured credit card, which gives you access to credit through a deposit that matches your card’s limit. This helps you establish a positive payment history. Make sure to pay all your bills on time and pay off your balances in full each month. Keep your credit utilization low by avoiding maxing out your card. It’s also a good idea to regularly check your credit report for errors and dispute any inaccuracies.