Consumer Proposals Canada – What You Need to Know
Consumer proposals are one of the best ways to deal with debt in Canada in 2025. If you can’t afford your repayments, our Licensed Insolvency Trustees can help you get back on track.
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What is a consumer proposal in Canada?
A consumer proposal in Canada is a formal, legally binding debt settlement agreement filed under the Bankruptcy and Insolvency Act (BIA).
It lets you repay a portion of unsecured debt every month over a set period (usually between three and five years) while protecting your assets and avoiding the long-term consequences of bankruptcy. When filed, all interest on your debt stops, and creditors are no longer able to contact or take legal action against you.
They’re often the best solution if you’re struggling with unsecured debts—like credit card debt, personal loans, lines of credit, or even CRA tax debt—but you still have a steady income and want to avoid bankruptcy.
As they offer full legal protection and can clear up to 80% of your debt, consumer proposals are one of the most effective options for those needing debt relief in Canada.
Licensed Insolvency Trustees (LIT) are the only professionals authorized by the Office of the Superintendent of Bankruptcy (OSB) to administer consumer proposals.
Who qualifies for a consumer proposal in Canada?
To qualify for a consumer proposal, you must:
- Owe between $1,000 and $250,000 in unsecured debt (excluding your mortgage).
- Be insolvent (meaning you can’t pay your debts as they come due).
- Have a stable income that allows for regular monthly payments.
- Be an individual (not a corporation) residing or owning property in Canada.
Your LIT will assess your financial situation and confirm if you’re eligible before filing your consumer proposal in Canada. If you have joint debt, such as with a spouse, a joint consumer proposal can be filed so both parties share one monthly payment.
Almost 8 in 10 Canadians who file for insolvency choose a consumer proposal. If you’re struggling with unsecured debt and want to keep your home, vehicle, or other assets while making payments you can actually manage, a consumer proposal is often the best fit.
What types of debt are included in a consumer proposal?
Several types of debt are included in a consumer proposal, such as:
- Credit cards
- Lines of credit
- Bank loans and overdrafts
- CRA income tax debt
- Payday loans
- Certain personal loans
What debts aren’t included in a consumer proposal?
- Secured loans (e.g., car loans or mortgages)
- Student loans less than seven years old
- Child or spousal support
- Court-imposed fines or restitution orders
How does the consumer proposal process work?
The consumer proposal process in Canada follows a set of regulated steps designed to protect both you and your creditors. Once filed, it immediately stops creditor action and gives you room to work out a repayment plan you can stick to. Most proposals are completed within five years or less.
If you want to understand the professional standards behind this process, CAIRP offers clear guidance on how Licensed Insolvency Trustees are trained and regulated. Their resources help you feel confident that the people handling your proposal are qualified and accountable.
Step 1: Consultation with a Licensed Insolvency Trustee (LIT)
You’ll begin with a free consultation where your LIT reviews your income, debt, and assets to figure out if a proposal is your best option. They’ll explain all of your options, such as bankruptcy, consolidation loans, or credit counseling, so that you can make a confident decision about your next step.
Step 2: Preparing your consumer proposal
Your LIT prepares a proposal outlining how much you can afford to repay. Payments are typically monthly and based on your budget and income. The goal is to offer creditors a higher recovery than they would receive through bankruptcy, while still working to a budget you can reasonably afford.
Step 3: Filing the consumer proposal with the OSB
Once the proposal is filed, the Office of the Superintendent of Bankruptcy issues an automatic stay of proceedings, which legally stops interest and other creditor action, like wage garnishments and collection calls. This protection stays in place as long as you keep up with the repayments.
Step 4: Creditor review and vote
Creditors have 45 days to vote on whether to accept your proposal. If the majority (by dollar value) accept, it becomes legally binding on all unsecured creditors, even those who voted against it.
Step 5: Court approval
In most cases, approval is automatic. If the court requests a review, your trustee represents you at the hearing to confirm compliance with the law.
How much does a consumer proposal cost?
One of the main advantages of a consumer proposal in Canada is that the cost is fixed, transparent, and regulated by federal law.
There are no upfront fees; your LIT’s fees are included in your regular monthly payments. These payments are based on your specific situation, so that you can afford the repayments. Factors that determine your payment amount include:
- Your monthly income and essential expenses
- Value of assets
- Total debt level
- Creditor willingness
Typical repayment plans reduce total unsecured debt by up to 70–80%, with one consistent payment for up to five years. Since no interest accrues, the amount you agree to is the final amount you’ll pay.
See how much you could save with a consumer proposal
Your Potential Debts:
Your monthly repayments over a 60-month period would be
Before Consumer Proposal
$1409
After Consumer Proposal
$210
Monthly payments are determined based on individual financial factors
How Much Could I Save?What are the pros and cons of a consumer proposal in Canada?
A consumer proposal is often the best middle ground between full repayment and bankruptcy, but it’s not always the best choice for everyone. It gives you a practical way to deal with debt without the harsher impact of bankruptcy. Just keep in mind—it only works if you stay on track with your payments. A quick consultation with a Licensed Insolvency Trustee can help you weigh your options. Take a look below at some of the main pros and cons of a consumer proposal.
Consumer proposal pros
- Stops wage garnishments and collection calls immediately
- Keep your home, car, and other assets
- Consolidates multiple debts into one payment
- Freezes interest and creditor action, stops garnishment
- Avoids bankruptcy and makes it easier to rebuild your credit
- Protects from lawsuits once filed
Consumer proposal cons
- Missed payments can annul the proposal
- Appears on your credit report (R7 rating)
- Remains on credit file for 3 years after completion, or 6 years from filing date, whichever is first
- Not all debts are eligible (e.g., student loans <7 years)
- Requires a steady income and creditor approval
- Public record under the Bankruptcy and Insolvency Act (requires payment to access)
What happens to your credit score after a consumer proposal?
A consumer proposal impacts your credit report, but not permanently. When filed, it is recorded as an R7 rating, indicating that you are making regular payments under a structured debt repayment plan.
- The R7 rating remains for three years after completion or six years from the filing date, whichever comes first.
- After completion, your credit file shows “settled” or “paid as agreed under proposal.”
How to rebuild credit after a consumer proposal:
- Use a secured credit card to rebuild a positive credit history.
- Pay all bills on time; even small utilities or phone bills build credibility.
- Monitor your credit score so that you can track improvements and understand what you need to do.
- Avoid unnecessary credit applications and focus on consistent, responsible credit use instead.
- Work with a trustee or credit counselor—they can help create a credit rebuild plan.
Consumer proposal vs bankruptcy in Canada
The main difference between a consumer proposal and bankruptcy is simple: a consumer proposal lets you repay part of what you owe, while bankruptcy clears your debts entirely—but with much stronger financial and credit consequences.
Both options fall under the Bankruptcy and Insolvency Act and must be handled by a Licensed Insolvency Trustee (LIT). But if you have a steady income and want to avoid the longer-term impact and potential loss of assets that can come with bankruptcy, a consumer proposal is usually the better fit.
Eligibility
- Consumer proposal: Between $1,000 and $250,000 in unsecured debt (excluding mortgage)
- Bankruptcy: No debt limit
Payments
- Consumer proposal: Fixed monthly payments usually over 3–5 years
- Bankruptcy: Potential payments based on surplus income and for admin costs
Assets
- Consumer proposal: You keep your assets (e.g., your home and car)
- Bankruptcy: Some assets may have to be surrendered
Credit Rating
- Consumer proposal: R7 (removed 3 years after completion or 6 years after filing—whichever comes first)
- Bankruptcy: R9 (remains for 6–7 years after discharge, depending on province and 14 years for a second+ bankruptcy)
Interest
- Consumer proposal & bankruptcy: All interest and penalties stop
What happens if you miss payments or default on a consumer proposal?
Missing payments in a consumer proposal can lead to serious consequences. Three missed monthly payments (or the equivalent of three months’ worth) result in automatic annulment of your proposal.
Here’s what you need to know:
- If you miss a payment, contact your Licensed Insolvency Trustee immediately. They can sometimes amend your proposal to adjust payment terms or allow a short deferral.
- If annulled, creditors regain full rights to pursue the original debts, including interest, lawsuits, or wage garnishment.
- You may still have the option to file a second consumer proposal or declare bankruptcy if your situation has changed.
Keeping open communication with your LIT is really important. They can help you manage unexpected hardships like job loss or illness through payment adjustments.
Can you include CRA tax debt in a consumer proposal?
Yes, CRA tax debt can be included in a consumer proposal. This can cover:
- Income tax owing
- GST/HST debt
- Overpayment of government benefits (e.g., CERB, EI)
The Canada Revenue Agency (CRA) is one of the biggest creditors in the country, and it regularly accepts proposals as long as the offer provides a reasonable recovery. Once your proposal is filed, the automatic stay of proceedings kicks in, which stops all CRA collection action—no more interest, wage garnishments, or frozen bank accounts.
To stay in good standing with the CRA, you’ll need to keep filing your tax returns on time throughout the proposal. The CRA expects you to stay compliant going forward, even while your past debt is being dealt with.
Can I get a joint or second consumer proposal?
Yes, depending on your financial situation, you can get a joint or second consumer proposal. Here’s how each one works:
Joint consumer proposal
If you and your spouse or partner share debts, such as joint credit cards or loans, you may file a joint consumer proposal. In a joint proposal:
- One combined payment covers all shared debts.
- The process is identical to an individual proposal, but the combined debt limit is $500,000.
- It simplifies repayment and gives both of you protection from creditors.
Second consumer proposal
If you’ve completed or defaulted (and then completed a bankruptcy) on a previous proposal, you can still file a second consumer proposal in Canada. Your Licensed Insolvency Trustee will assess whether it’s the best solution or if bankruptcy is more appropriate based on your current financial state.
What are the alternatives to a consumer proposal?
While a consumer proposal is often the best option, it’s not the only form of debt relief in Canada. Depending on your situation, other solutions might be more suitable. Each option has trade-offs, so it’s important to talk with a Licensed Insolvency Trustee for impartial advice on what fits your financial goals.
- a. Bankruptcy
Bankruptcy eliminates most unsecured debt but can involve surrendering some assets and has a longer credit impact (R9 rating). - b. Debt consolidation loan
A debt consolidation loan combines multiple debts into one new loan and is best for individuals with good credit and steady income. - c. Debt Management Plan (DMP)
Administered by a nonprofit credit counseling agency, a DMP consolidates unsecured debts into one payment, often with reduced or zero interest. - d. Informal debt settlement
Negotiating directly with creditors for partial payments or lump-sum debt settlements, this option is less regulated and riskier.
How to choose a Licensed Insolvency Trustee in Canada
Since only a Licensed Insolvency Trustee can file a consumer proposal, choosing the right one makes a huge difference in your experience and outcome. Here’s what to keep in mind:
- Verify their credentials: Use the OSB’s Licensed Insolvency Trustee Registry to confirm they’re properly licensed.
- Ask about experience: Look for a trustee who regularly handles situations similar to yours.
- Look for transparency: Their fees and process should be clearly explained—no surprises and no pressure to commit to a specific plan.
- Choose someone who listens: A good LIT guides you through the process with clarity and without judgment.
If you’re looking for support you can trust, Harris & Partners is here to help. We’ve guided thousands of Canadians through consumer proposals. This year alone, we’ve filed proposals on over $416 million of debt. Each time, helping Canadians get a fresh financial start with confidence.
Book a free consultation with a Licensed Insolvency Trustee in Canada today and start your path to a debt-free life.
File a consumer proposal with Harris & Partners
We’ll start with a confidential chat to understand your debt situation. We’ll go over what you owe, your monthly income, and any assets you have. There’s no pressure or judgment, this will simply give you a clear look at your options.
Once we understand your finances, and if it’s the right choice for you, we’ll build a consumer proposal that works for your situation. We’ll look at what your creditors are likely to accept and what you can realistically afford.
When you’re happy with the plan, we’ll file it and handle all communication with your creditors. From there, you’ll make one fixed payment every month until the debt is paid.
Why choose us for consumer proposals in Ontario?
Our Licensed Insolvency Trustees can provide a customised consumer proposal that could shrink your debt by up to 80%.
Our multilingual team offers debt support in Farsi, Portuguese, Italian, Tamil, and more, so you can feel comfortable every step of the way.
With offices in nine provinces, we offer in-person debt support across Canada—from Atlantic provinces to Ontario to British Columbia.
FAQs about consumer proposals in Canada
Who can file a consumer proposal?
To file a consumer proposal in Canada, you must meet the following criteria:
- Be an individual (not a business)
- Owe between $1,000 and $250,000 in unsecured debt (excluding your mortgage)
- Be insolvent, meaning you can’t afford to pay your debts as they come due
- Be either a Canadian resident or have assets in Canada
You must also work with a Licensed Insolvency Trustee (LIT), as they’re the only professionals legally allowed to file a consumer proposal on your behalf.
Even if you’re employed or own a home, you can still qualify. A quick consultation with an LIT can confirm your eligibility and whether a proposal is your best option.
What is the catch of a consumer proposal?
There’s no hidden “catch,” but it’s important to understand the full picture:
- It impacts your credit (R7 rating stays for 3 years after completion or 6 years after default, whichever comes first)
- If you miss 3 payments, the proposal can be annulled
- Not all debts are included, such as secured loans, recent student loans, or support payments
That said, for many Canadians, the benefits—debt reduction, legal protection, and asset retention—far outweigh the downsides.
What are the key features of a consumer proposal?
The key features of a consumer proposal include:
- Legally stops collection calls, wage garnishments, and interest
- Reduces your total unsecured debt—often by 60–80%
- One affordable monthly payment, fixed for up to 5 years
- You keep your home, vehicle, and other assets
- No bankruptcy on your credit record (a consumer proposal is listed as an R7, not an R9)
Will my credit score go up after a consumer proposal in Canada?
Your credit score may initially drop when you file a consumer proposal, as it’s reported as an R7 rating. However, once you complete the proposal and begin rebuilding your credit, many people see a steady increase in their score over time. You can start improving your credit even while making payments by using secured credit products and staying current on bills.
Can a consumer proposal be rejected?
A consumer proposal can be rejected by a creditor, but that doesn’t mean you are out of options or alternatives.
After you file a consumer proposal, creditors have 45 days to vet and vote on your proposal. In that time, they can: reject the proposal, reject the terms of the proposal and ask for a creditors meeting, accept the proposal or do nothing.
Votes are counted only if a creditors meeting is requested. If creditors then vote to reject your proposal by a majority, you have the following options:
- Renegotiate the terms of your proposal
- Withdraw your proposal and file for bankruptcy
- Pursue a different type of debt relief solution
- File for a new proposal at a future date
Our Licensed Insolvency Trustees - here to help with consumer proposals
With our Licensed Insolvency Trustees, you will never have to face the stress of debt alone. We are backed by decades of experience and are ready to help you find a way to financial security.
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Jay T. HarrisFCPA, CIRP, LITLicensed Insolvency Trustee -
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Kyle HarrisLL.B., CIRP, LITLicensed Insolvency Trustee -
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Adam FisherCPA, CIRP, LITLicensed Insolvency Trustee -
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Joshua HarrisBCOMM., MIB, CIRP, LITLicensed Insolvency Trustee -
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Robert McLernonBComm, CIRP, LITLicensed Insolvency Trustee -
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Shelley KoehliLicensed Insolvency Trustee -
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Jill StruebyLicensed Insolvency Trustee
Where you can find our consumer proposal services in Canada
We operate across all provinces in Canada except Quebec, so help is always available at a Harris & Partners office near you.
File a debt consumer proposal with Harris & Partners
Harris & Partners Inc. is a licensed trustee insolvency (LIT) providing specialist debt relief options to help you manage your financial troubles. Whether you’re ready to file a consumer proposal, or want to explore other options like debt consolidation or bankruptcy, we’re here to support you.
Our range of debt help solutions in Canada is available across Canada. We are determined to use our expertise to help you live debt-free. Get in touch with a member of our team today!
It's never too late to obtain debt help. Book your free consultation today
- Phone number
- 800-268-8093
- hello@harrispartners.ca
