Quick answer: To qualify for a consumer proposal in Canada, you must be insolvent, owe between $1,000 and $250,000 in unsecured debt (excluding your mortgage), have a steady income to support monthly payments, and live in Canada or own property here.
Figuring out whether you qualify for a consumer proposal can feel overwhelming when you’re already dealing with debt.
The good news? The rules are clear enough, and once you understand them, it becomes much easier to see whether a proposal is the right debt solution for you.
This guide walks you through everything you need to know: what a consumer proposal is, who qualifies, how a Licensed Insolvency Trustee (LIT) decides your eligibility, and the steps you can take to strengthen your chances of approval.
By the end, you’ll know exactly where you stand and what options are available to help you move toward a fresh financial start.
Jump to:
- What is a consumer proposal in Canada?
- What are the basic qualifications for a consumer proposal?
- Who does not qualify for a consumer proposal?
- How a LIT determines your eligibility for a consumer proposalÂ
- Signs that you might need a consumer proposal
- Step-by-step: How to qualify and file a consumer proposal
- How to improve your chances of qualifying for a consumer proposal
- What are my options if I don’t qualify for a consumer proposal?
- FAQs about qualifying for a consumer proposal
What is a consumer proposal in Canada?
A consumer proposal in Canada is a legally binding debt relief agreement under the Bankruptcy and Insolvency Act (BIA). It allows individuals repay a portion of what they owe to creditors through affordable monthly payments.
This is typically completed over a three- to five-year term. It is one of the most common bankruptcy alternatives in Canada, with almost 8 in 10 Canadians who file for insolvency choosing a consumer proposal.
What are the basic qualifications for a consumer proposal?
To qualify for a consumer proposal in Canada, you need to meet the eligibility criteria set out under the Bankruptcy and Insolvency Act. In simple terms, it’s meant for people who can’t keep up with their debts as they come due but have an income that could meet a realistic repayment plan.
What is the eligibility criteria for a consumer proposal?
- Debt threshold: You must owe more than $1,000 but less than $250,000 in unsecured debt (excluding the mortgage on your home).If you’re filing a joint consumer proposal with a spouse or partner, your combined unsecured debt must not exceed $500,000.
- Debt type: Qualifying unsecured debts include credit cards, lines of credit, personal loans, payday loans, and Canada Revenue Agency (CRA) tax debt. Secured debts such as car loans, home equity lines, or mortgages cannot be reduced or included in a proposal.
- Residency requirement: You must either reside in Canada or own property within the country.
- Insolvency requirement: You must be insolvent, meaning your debts are higher than the value of your assets, or you cannot pay your bills on time.
- Stable income: You must have a consistent income that can support the proposed monthly repayment plan.
Who does not qualify for a consumer proposal?
You may not qualify for a consumer proposal if:
- You are a corporation or business (these must file a Division I proposal instead).
- Your unsecured debt exceeds $250,000 (not including your mortgage).
- You are not insolvent, meaning you can repay your debts in full without help
You may also not qualify for a consumer proposal if you have:
- Insufficient income: A consumer proposal must offer creditors a repayment amount you can realistically afford. If your income doesn’t consistently cover living costs plus a proposal payment, your Licensed Insolvency Trustee (LIT) may decide a consumer proposal isn’t the right option.
- Excessive debt: If your unsecured debt is above the $250,000 limit, you won’t qualify for a standard consumer proposal. In this case, a Division I proposal—designed for higher debt levels—may be the best option.
- Ineligible debts: Certain debts cannot be reduced or included in a consumer proposal, such as:
- Secured debts (mortgages, car loans)
- Student loans under seven years old
- Child support or spousal support
- Court fines and penalties
- Previous bankruptcy or proposal default: If you recently filed for bankruptcy or defaulted on a previous consumer proposal, you may still qualify, but in some cases, your LIT may advise waiting or exploring other solutions first.
If most of your debt falls into these categories, a proposal may not solve your financial situation.
How does a Licensed Insolvency Trustee determine your eligibility for a consumer proposal?
When you meet with a Licensed Insolvency Trustee, they’ll give you a free and confidential financial assessment to see whether a consumer proposal is the right fit for you.
Your LIT will look at:
- Your total unsecured debt compared to the value of your assets
- Your monthly income and expenses to determine what you can realistically afford
- How stable your job or household income is
- Your repayment and credit history
- Your family size and dependents, which help define reasonable living expenses
Using this information, your LIT will build a repayment offer that’s fair to your creditors but still affordable for you.
What are the signs that you might need a consumer proposal?
You don’t need to wait for a financial crisis to explore your debt relief options. Certain warning signs often suggest you may be eligible or soon will be for a consumer proposal:
- Struggling to make minimum payments on credit cards or loans.
- Frequently using credit to pay for basic living expenses.
- Receiving collection calls or wage garnishment notices.
- Carrying maxed-out credit cards or high-interest payday loans.
- Falling behind on CRA tax payments or other obligations.
- Experiencing stress or anxiety related to unmanageable debt.
If you recognize any of these signs, it’s worth booking a free consultation with a Licensed Insolvency Trustee.
Step-by-step: How to qualify and file a consumer proposal
Once you’ve confirmed that you meet the basic eligibility criteria, your Licensed Insolvency Trustee (LIT) will guide you through the consumer proposal process.
This follows strict federal regulations under the Bankruptcy and Insolvency Act and protects both you and your creditors.
Step 1: Free consultation with a Licensed Insolvency Trustee
Your journey begins with a free, confidential consultation. The trustee reviews your financial information (debts, income, expenses, and assets) to determine whether you’re insolvent and if a consumer proposal is the best option.
Step 2: Financial assessment and proposal planning
If you qualify, your LIT will create a detailed financial snapshot showing what you can reasonably afford to pay each month.
They’ll then develop a repayment proposal that offers creditors more money than they would receive if you filed for bankruptcy.
Step 3: Filing the consumer proposal with the OSB
The trustee files your proposal with the Office of the Superintendent of Bankruptcy (OSB). At this point, a stay of proceedings automatically takes effect, which legally stops:
- Collection calls
- Wage garnishments
- Interest accumulation
- Legal action from unsecured creditors
Step 4: Creditor review and voting
Your creditors have 45 days to review and vote on the proposal. If the majority approve, the proposal becomes legally binding for all unsecured creditors, even those who voted against it.
Step 5: Court approval and implementation
In most cases, court approval is automatic. Once confirmed, you begin making fixed monthly payments directly to your LIT, who distributes the funds to your creditors.
If the court requests a review, your trustee represents you at the hearing to confirm compliance with the law.
Step 6: Financial counselling sessions
During the repayment period, you’ll attend two mandatory credit counseling sessions to learn about budgeting, managing credit, and rebuilding financial health after debt.
Step 7: Completion and discharge
After your final payment, your trustee issues a Certificate of Full Performance. This document confirms your debts are legally settled, and your financial fresh start begins.
How to improve your chances of qualifying for a consumer proposal
If you’re close to meeting the requirements or if your financial situation is borderline, there are practical steps you can take to improve your consumer proposal eligibility.
- Organize your financial information
Prepare accurate and up-to-date documentation of your debts, income, expenses, and assets. Having clear records helps your trustee create a stronger proposal for creditor approval.
- Demonstrate consistent income
Lenders and trustees need to see that you can sustain regular payments. Providing proof of steady employment or household income can strengthen your application.
- Avoid taking on new debt
Don’t apply for new loans or use additional credit before filing a proposal. This can be a sign of continued financial instability—you want your creditors to feel confident in your ability to stick to repayments.
- Work with a reputable Licensed Insolvency Trustee
A qualified LIT can help negotiate fair repayment terms, making sure your creditors see your proposal as reasonable and sustainable.
- Create a budget before filing
Knowing exactly how much disposable income you have will help you set realistic payment goals. Your LIT can help you with budgeting and forecasting repayment scenarios.
What are my options if I don’t qualify for a consumer proposal?
If you’re not eligible for a consumer proposal, other debt relief options can still help. Your Licensed Insolvency Trustee can guide you toward the most suitable solution.
Common alternatives include:
- Debt Management Plan (DMP): A nonprofit credit counseling agency can consolidate your unsecured debts into one monthly payment, often at a reduced interest rate. However, it does not reduce the total principal owed.
- Debt consolidation loan: If your credit score and income allow, you can combine multiple debts into a single loan. This simplifies repayment but may require collateral and can sometimes come with high interest rates.
- Bankruptcy: If your debt is too high or your income too low for a proposal, personal bankruptcy might be your best option. It has a greater impact on your credit rating (R9 rating) but allows you to clear the slate and start fresh.
Ready to find out if you qualify for a consumer proposal?
If you’re considering a consumer proposal, you don’t have to figure it out on your own. Harris & Partners has helped thousands of Canadians successfully file proposals.
In the past year alone, we’ve supported over 11,800 people with consumer proposals—we’re ready to do the same for you.
Our Licensed Insolvency Trustees know the process inside out and will walk you through your options with clarity, compassion, and zero judgment.
Your first consultation is completely free and comes with no obligation. Book a time that works for you, get straightforward answers, and take the first step toward a more manageable financial future.
