Consumer Proposal FAQ (Ontario)
Common questions about filing a consumer proposal in Canada
A consumer proposal is a federally regulated debt relief option under the Bankruptcy and Insolvency Act. It allows eligible Canadians to work with a Licensed Insolvency Trustee (LIT) to offer creditors a structured repayment plan often for less than the full amount owed based on what you can reasonably afford.
If you’re dealing with collection calls, wage garnishment risk, or rising interest costs, a consumer proposal may provide a legal framework to deal with unsecured debt. The best next step is usually to review your debts, income, and assets with an LIT so you can compare a consumer proposal with other options (like consolidation, credit counselling, or bankruptcy) based on your circumstances.
Who qualifies for a consumer proposal in Ontario?
In general, you may qualify if you’re insolvent (unable to pay debts as they become due) and your unsecured debts are $250,000 or less (not including the mortgage on your principal residence). An LIT will review your full situation income, household expenses, assets, and types of debt to confirm eligibility and whether a proposal is the most suitable option for you.
What debts can be included in a consumer proposal?
A consumer proposal typically covers unsecured debts, such as credit cards, lines of credit, payday loans, personal loans, and many CRA debts (depending on the circumstances). Secured debts like a mortgage or car loan are usually not included because they’re tied to an asset those payments generally continue if you keep the asset and stay up to date.
Does filing a consumer proposal stop collection calls and legal action?
When a consumer proposal is filed, there is generally a stay of proceedings, which means unsecured creditors must stop most collection actions and direct communication to your Licensed Insolvency Trustee although exceptions can apply depending on the type of debt and the legal situation.
How long do creditors have to accept or reject a consumer proposal?
After filing, creditors have a set period to respond and may request a meeting. Your LIT can explain how creditor voting works and what happens if changes are requested. (This timing is governed by the insolvency process and can vary based on the file.)
How much can a consumer proposal reduce my payments?
Payment amounts are based on your specific circumstances your income, reasonable household expenses, assets, and what creditors may accept. Some people see significant reductions, while others propose repayment closer to the full amount. It’s best to treat “savings” as case-by-case rather than a promise.
Will I lose my assets if I file a consumer proposal?
A key difference between a consumer proposal and bankruptcy is that a proposal generally allows you to keep assets, because you’re offering a repayment plan rather than surrendering non-exempt assets. That said, asset values can influence what creditors may expect in a proposal. Your LIT can explain how home equity, vehicles, and savings may factor into your proposal terms.
How does a consumer proposal affect my credit score?
A consumer proposal is reported on your credit history and can impact your ability to qualify for new credit while it’s active and for a period afterward. However, many people considering a proposal have already experienced credit score damage from missed payments or collections. An LIT can explain what to expect and how credit rebuilding typically works during and after completion.
How long does a consumer proposal stay on your credit report in Canada?
According to the Financial Consumer Agency of Canada, Equifax and TransUnion generally remove a consumer proposal from your credit report either 3 years after you complete it or 6 years after you sign/file it (whichever comes first).
Can student loans be included in a consumer proposal?
Student loans can be included, but government student loans may not be released unless certain conditions are met often tied to the “seven-year rule” under federal insolvency law.
Because student loan eligibility can be fact-specific, it’s worth reviewing your “end of study date” and loan type with an LIT.
Is credit counselling required in a consumer proposal?
Yes. Credit counselling sessions are generally a required part of the consumer proposal process and are designed to help with budgeting, credit rebuilding, and avoiding future debt problems.
Can I include CRA tax debt in a consumer proposal?
In many cases, CRA debts (like income tax debt) can be included as unsecured claims, and CRA participates in the proposal process like other creditors. Your LIT can confirm what applies in your situation, especially if there are source deductions or other special circumstances.
Can my spouse and I file a joint consumer proposal?
In some cases, yes—particularly when most debts are shared or co-signed. Eligibility depends on how the debts are structured and whether both parties qualify. A joint proposal can simplify repayment when finances are closely tied.
What happens if I miss payments in a consumer proposal?
A proposal has rules around missed payments. Falling behind may put the proposal at risk of being annulled, depending on how many payments are missed and whether the issue is corrected in time. If you’re struggling, it’s important to speak with your LIT as early as possible to discuss options.
Can I pay off a consumer proposal early?
Many proposals allow for early payoff, but how it’s handled depends on your proposal terms. Your LIT can explain whether prepayment changes anything and how to make sure the completion is properly documented.
Is a consumer proposal “better” than bankruptcy?
It depends. A consumer proposal may be a fit when you can afford to repay part of what you owe and want to avoid bankruptcy, but bankruptcy may be more appropriate in other situations. Comparing options with a Licensed Insolvency Trustee is the most reliable way to decide.
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