When most people hear about a consumer proposal, they think of it as a way to reduce how much debt they owe—and in many cases, that’s exactly what it does. But here’s something you may not realize: even if your creditors require you to repay 100% of your debt, filing a consumer proposal can still be worth it.
At David Sklar & Associates, we often meet people who assume they don’t qualify for a proposal simply because they own a home or have a higher income. Yes, those factors impact whether you’re eligible for a debt reduction, and how much you end up paying. But they don’t stop you from filing a consumer proposal itself—and the benefits of doing so can still be substantial.
Let’s break down why paying back all your debt through a consumer proposal can still work in your favour.
What Is a Consumer Proposal?
A consumer proposal is a legally binding agreement between you and your unsecured creditors, filed with the help of a Licensed Insolvency Trustee (LIT). It allows you to consolidate your debts into one monthly payment and repay either part or all of your debt over five years. Depending on your situation, you could have up to 80% of your debts forgiven, leaving you with a small balance to manage.
A key difference between a consumer proposal and other debt repayment plans is that it offers legal protection under the Bankruptcy and Insolvency Act. Once your proposal is filed and accepted, creditors can no longer call you, sue you, or garnish your wages.
Debunking the myth: “You must get a debt reduction”
One of the biggest misconceptions we hear is that a consumer proposal only makes sense if you get a reduction in what you owe. However, a proposal offers value beyond lowering your unsecured debts, including eliminating interest and giving you legal protection.
Let’s say you own a home with a large amount of equity or earn a high income. In that case, your creditors may expect you to repay 100% of your debt. This is because, under the rules set out by the Office of the Superintendent of Bankruptcy Canada (OSB), creditors are entitled to receive at least as much in a proposal as they would in a bankruptcy. So, if you have significant assets or earnings, a full repayment proposal may be necessary to meet that threshold.
However, that doesn’t mean a consumer proposal can’t help you deal with unaffordable debts. In many cases, it’s a better option than trying to pay off your debt using a home equity loan or other DIY solution.
The hidden value of a 100% repayment proposal
A consumer proposal offers powerful benefits that make it a wise choice for debt relief, even if you must repay every dollar owed.
No interest charges
When you consolidate your unsecured debts under a single loan, you must pay interest. Although you may secure a lower rate than what you previously paid, the interest charges still add up over time. In Canada, lenders can charge rates as high as 35%. That interest can cause your debt to snowball fast.
When you file a consumer proposal, all interest and penalties stop immediately. You only repay the agreed-upon amountnothing more.
For example, let’s say you owe $40,000 in credit card debt, paying a 22% interest rate. You decide to combine this debt under a 10-year loan that charges 15% since it’s a better deal. However, under this plan, you still end up paying a total of $77,000, or, to put it another way, $37,000 in interest. In a proposal, you would pay back just the $40,000 with no interest and be debt-free in five years or less.
One affordable monthly payment
Instead of juggling multiple bills, due dates, and interest rates, a consumer proposal simplifies your finances. You make one fixed monthly payment that fits your budget, and it covers all your unsecured debts, including credit cards, payday loans, and lines of credit. Unlike a regular debt consolidation loan, you can even include tax debt. And, under certain circumstances, student loans in a consumer proposal are allowed.
Legal protection from creditors
Once your consumer proposal is filed, you gain legal protection. Creditors must stop collection calls, lawsuits, and wage garnishments. They also cannot freeze your bank account to pressure you into paying what you owe. This protection gives you peace of mind and lets you focus on rebuilding without the constant pressure and stress from aggressive creditors.
On the flipside, taking out a debt consolidation loan or enrolling in a debt management program (DMP) won’t prevent creditors from taking legal action against you for unpaid debts.
No loss of assets
Unlike bankruptcy, a proposal allows you to keep your home, vehicle, and registered investments. If you’re a homeowner with equity, a consumer proposal lets you repay your debts over time without being forced to sell your property.
Unsecured creditors also cannot put a lien on your home and other assets after you file a consumer proposal.
Credit score recovery timeline is the same
Whether you pay back a portion or the full amount of your debt through a proposal, the impact on your credit score is the same: a note remains for up to three years after your final payment, or six years in total, whichever is shorter. However, some lenders may view full repayment more positively when you begin rebuilding credit.
Scenarios where a 100% consumer proposal makes sense
Filling a 100% consumer proposal can make sense in the following circumstances:
- You’re a homeowner with a considerable amount of equity in your property
- You own many valuable assets, including investments
- You earn a high income
- You’re a business owner or self-employed individual
How to know if a full repayment consumer proposal is right for you
Everyone’s financial situation is unique. A debt relief solution that works for one person may not be appropriate for you. That’s why we encourage you to learn about the pros and cons of a consumer proposal before deciding it’s the path you want to take.
However, the best way to know if a consumer proposal is the right option is to speak with a Licensed Insolvency Trustee. At David Sklar & Associates, we offer free, no-obligation consultations to review your debt, income, assets, and goals. Whether you’ve been told you don’t qualify by another firm or you’re just unsure about your choices, we’re here to give you a clear and honest answer.
The bottom line on full repayment proposals
A consumer proposal isn’t just about reducing what you owe—it’s about giving you structure, peace of mind, and a realistic path to becoming debt-free. Even if you’re required to repay your debts in full, doing so through a consumer proposal can save you money, protect your assets, and help you move forward with confidence.
If you’re feeling overwhelmed by debt, book a free consultation online with David Sklar & Associates today.
