If you’re here, chances are money has stopped being a background worry and started intruding on everything else. Sleep. Focus. Mood. The sense that you’re always one bill behind. That feeling is far more common than people like to admit.
At Harris & Partners, we see it every day. In fact, during 2024 alone, more than 137,000 Canadians reached a breaking point and filed a consumer insolvency. Nearly eight in ten of them chose a Consumer Proposal over bankruptcy, a clear sign that people are actively looking for structured, realistic ways to regain control.
For many, the decision comes down to two very different paths: a Consumer Proposal or an informal debt settlement. Both can reduce what you owe. Both can offer relief. But the way they work and the level of protection they give you are worlds apart. Understanding that difference is where clarity begins.
Consumer Proposals: Structure, protection, and a finish line
A Consumer Proposal is a formal, government-regulated solution under the Bankruptcy and Insolvency Act. It allows you to repay a portion of what you owe, often up to 80% less than the full balance, over a set period. Once completed, the remaining debt is legally forgiven.
This is not a DIY process. Consumer Proposals can only be filed through a Licensed Insolvency Trustee (LIT), like Harris & Partners. That regulation matters. It ensures the process is fair, transparent, and enforceable for everyone involved.
One reason proposals have become the dominant choice across Canada is certainty. The moment a proposal is filed, a stay of proceedings takes effect. This means interest stops growing, collection calls are halted, and wage garnishments are paused. That breathing room is not theoretical; it is written into law.
Instead of juggling multiple creditors, you make one predictable monthly payment for up to five years. No surprise interest spikes or moving goalposts. And importantly, you keep your assets in most cases, as long as secured payments like a mortgage or car loan remain up-to-date.
In Ontario alone, Consumer Proposals now account for over 82% of all insolvency filings, and that share continues to rise year on year. People are choosing stability over uncertainty.
Informal debt settlement: Flexible, but fragile
Informal debt settlement sits at the opposite end of the spectrum. It is a private negotiation between you and your creditors, usually aiming to settle a debt for less than the full amount in exchange for a lump-sum payment.
Sometimes this works well, particularly if you have access to cash and only one or two smaller debts. Creditors may agree to take what they can get and close the account.
But there is no legal framework backing this up. Creditors are not required to cooperate. One may accept your offer while another continues collections or escalates to legal action. During negotiations, interest can continue to grow, and wage garnishments or lawsuits remain very much on the table.
There is also a tax consideration many people are unaware of. Under CRA debt forgiveness rules, cancelled debt may be treated as taxable income. What looks like relief today can quietly resurface as a tax bill later.
This doesn’t make informal settlement “wrong.” It just makes it risk-heavy.
The real difference: Protection versus flexibility
The cleanest way to think about this choice is protection versus flexibility.
A Consumer Proposal creates a single, binding agreement. Once the majority of creditors accept, all are bound by the terms, even those who voted against it. Informal settlements require one-by-one negotiations, with no guarantee of consistency or closure.
Costs follow the same pattern. Consumer Proposal fees are regulated and built into your monthly payment. With private settlement companies, fees vary widely and are often charged upfront or based on “savings,” which can eat into the benefit quickly.
Assets are another dividing line. A proposal is designed to protect your home and vehicle. Informal settlement offers no such shield if a creditor chooses to pursue legal remedies.
Which option tends to work best, and for whom?
There is no universal answer, despite what online ads might suggest.
A Consumer Proposal usually makes sense if you:
- Have steady income but cannot keep up with unsecured debt
- Are dealing with multiple creditors
- Are facing legal pressure, garnishments, or escalating collections
- Want a defined timeline and legal certainty
An informal settlement may be appropriate if you:
- Have a lump sum available immediately
- Only have one or two low-balance debts
- Are comfortable negotiating and managing risk
- Do not need immediate legal protection
In 2025, roughly one consumer insolvency was filed every four minutes, and the overwhelming majority chose proposals over bankruptcy or informal alternatives. That preference reflects lived outcomes, not theory.
A final thought, before you decide anything
Debt has a way of convincing people they need to rush or that they deserve whatever stress comes with it. Neither is true.
The right solution is the one that fits your numbers, your income, and your life, not the one that sounds fastest or least embarrassing. A conversation with a Licensed Insolvency Trustee costs nothing, commits you to nothing, and often replaces fear with actual options.
At Harris & Partners, those conversations are what we do every day. Not to push a specific outcome, but to help people understand what will genuinely move them forward, without surprises later.
You’re not out of options. You’re just at a decision point. Give us a call today and start your path to a debt-free future.
