If you're struggling with debt in Canada, a consumer proposal may be an option to consider. A consumer proposal is a legal process that allows you to negotiate with your creditors to settle your debts for less than you owe. In this blog, we'll discuss the pros and cons of consumer proposals, who may file a consumer proposal, how much it costs, what debts are included, how it affects your credit, and why it may be a better option than bankruptcy.

Pros of a Consumer Proposal:

  • Debt Relief: A consumer proposal provides much-needed relief from overwhelming debt. By consolidating your debts into one manageable payment, you can reduce your stress and regain control of your finances.
  • Protection from Creditors: Once your consumer proposal is accepted, you'll be protected from any further collection actions from your creditors. This means no more phone calls, letters, or wage garnishments.
  • Keep Your Assets: With a consumer proposal, you'll be able to keep your assets while you work to repay your debt. This means you won't have to worry about losing your home or other important possessions.
  • Affordable Payments: Consumer proposals are designed to be affordable, with payments based on what you can realistically afford.

Cons of Consumer Proposals

  • Negative Impact on Credit Score: Filing a consumer proposal may have a negative impact on your credit score. However, this impact is typically less severe than that of a personal bankruptcy and will typically be erased from your credit report 3 years after you have completed your proposal but it will never be more than 6 years since the consumer proposal is registered.
  • Not all Debts are Included: Not all debts are eligible to be included in a consumer proposal, such as secured debts like a mortgage or car loan.
  • Proposal rejection: Because a consumer proposal is a legal negotiation with your creditors, there is a risk that your creditors will not accept your proposal. However, in our experience, we see over a 99% approval rating for all of the consumer proposals we have filed.

Who May File a Consumer Proposal?

Consumer proposals are available to individuals who owe between $1,000 and $250,000 in unsecured debts. Unsecured debts include credit card debts, personal loans, and other types of unsecured loans such as tax debt and small business loans. If you owe more than $250,000 in unsecured debts, you must file a different type of proposal called a Division I proposal.

In order to file a consumer proposal, you will need to work with a licensed insolvency trustee. The trustee will help you prepare your proposal and negotiate with your creditors on your behalf.

How Much Does a Consumer Proposal Cost?

Your proposal payment terms are based on the negotiation between what your creditors are willing you accept and what you can afford. Your licensed insolvency trustee will review your financial situation to determine what is a suitable amount for you to offer your creditors. There is no fee to your licensed insolvency trustee for filing your proposal, the amount you pay is only whatever amount that gets negotiated with your creditors.

What Debts Are Included in a Consumer Proposal?

A consumer proposal can include most types of unsecured debts, including credit card debts, personal loans, and other types of unsecured loans such as taxes, student loans (if more than 7 years have passed since you finished being a student) and small business loans. However, there are some types of debts that cannot be included in a consumer proposal, such as secured debts, such as mortgages or car loans.

How Does a Consumer Proposal Affect Your Credit?

A consumer proposal will have a negative impact on your credit rating. However, it is not as damaging as a bankruptcy. A consumer proposal will stay on your credit report for up to three years after you have completed your payments or up to six years from the date of filing your proposal, whichever comes sooner.

Why is a Consumer Proposal Better Than Bankruptcy?

While bankruptcy may be the best option for some people, a consumer proposal is often a better option for those who want to avoid filing for bankruptcy protection. One of the main advantages of a consumer proposal over bankruptcy is that it allows you to keep your assets, such as your home or car. In addition, a consumer proposal is less damaging to your credit than a bankruptcy.

Another advantage of a consumer proposal is that it provides a structured plan for paying off your debts. With a consumer proposal, you make a single monthly payment to a licensed insolvency trustee, who then distributes the funds to your creditors.


If you're struggling with debt in Canada, a consumer proposal may be a good option to consider. While there are some drawbacks to consumer proposals, they can be a great way to settle your debts for less than you owe and avoid bankruptcy. If you're considering a consumer proposal, it's important to work with a licensed insolvency trustee who can help you navigate the process and find the best solution for your situation.