Consumer Proposals

Learn how consumer proposals work, the long-term consequences, and what debts can be included.

Filing a Consumer Proposal in Canada

One option to consolidate your debts is to file a consumer proposal. Under the Bankruptcy and Insolvency Act, it’s a legal process and a matter of public record between you and your creditors to pay back part of what you owe. The amount you repay is largely based on your income and what you own. However, it typically decreases how much debt you have to repay your creditors greatly.

A consumer proposal can only be put together and administered by a licensed bankruptcy trustee and costs around $1,500 to file. You’ll pay an initial setup fee, and if it’s accepted by your creditors and approved by the courts, you’ll have to pay the balance to move forward. In addition to this, the trustee will take 20% of your future payments as a fee for overseeing and managing your consumer proposal. To be legally binding, the creditors who own the majority of your debt must agree to the proposal. Once they do, you repay the agreed amount over a maximum term of 5 years, and a permanent public record is placed in a searchable, online database.

Locations We Serve in Canada

British Columbia

Alberta

Saskatchewan

Manitoba

Ontario

Locations We Serve in Canada

British Columbia

Alberta

Saskatchewan

Manitoba

Ontario

Beware the Big Debt Rip-Off

Consumer proposals have become the latest method for a growing number of for-profit companies and their sales people to take advantage of vulnerable, unsuspecting consumers. Don’t let this happen to you! Many debt relief companies are now claiming to offer consumer proposals as an easy way to get out of debt. There’s a problem. Only a licensed bankruptcy trustee is allowed to file paperwork for a consumer proposal. The debt relief companies charge thousands in fees only to refer you to a bankruptcy trustee who then charges his or her own fees.

How to Keep from Getting Ripped Off

Follow the three tips below and start by speaking with a member of Credit Counselling Canada. CCC is an association of non-profit credit counselling agencies who do not work on commission. If a consumer proposal is truly one of your best options, one of their agencies can let you know and refer you to a reputable bankruptcy trustee for free.

Talk With a Non-Profit Credit Counsellor

Speak with a non-profit credit counsellor about your financial situation first. They will be able to review your situation with you and help you explore and understand all your options to deal with your debt.

Only Pay a Trustee for Consumer Proposal Services

Never pay money to anyone for consumer proposals services except a licensed bankruptcy trustee. By law, only a licensed trustee is permitted to do the work and charge for consumer proposals.

Watch Out for Commission Based Debt Consultants

Ask how the person helping you is compensated. Many people who will seek to advise you on your debts work on commission. Make sure the “solution” they are suggesting is in your best interest – not theirs.

What’s a Consumer Proposal?
Will It Affect My Credit?

A consumer proposal is a legal arrangement and is a matter of public record. It’s also noted on someone’s credit report, and is there for an additional 3 years after the proposal has been successfully completed.

How a consumer proposal affects credit will depend on what else is on someone’s credit report.

A family dicusses consumer proposals in front of a laptop.

Frequently Asked Consumer Proposal Questions

What Happens When You Miss Payments? - Consumer Proposal Defaults

A proposal has strict conditions. If someone misses 3 payments, the consumer proposal defaults and they are not able to file it again. Creditors will then proceed with collecting on what is still owed. This can include legal action.

What Debts Are Eligible for a Consumer Proposal? - How Student Loans Are Affected

Not all debts can be included in a consumer proposal. Student loans often can’t be included, especially if it has been less than 7 years from when someone stopped studying.

While someone is making payments on their consumer proposal, student loan payments aren’t required. However, interest is still added to the student loan during that time.

At the end of the proposal, someone may owe more on their student loan than they did before they filed the consumer proposal.

What Happens With Secured Debts and Assets?

Secured debts, like a car loan, also can’t be included in a proposal. Assets tied to secured loans may need to be sold when someone enters into a consumer proposal because someone isn’t able to manage the payments any longer. Other times, creditors won’t agree to a proposal if someone has assets they can sell to pay back the full amount of what they owe.

What Happens If I Default on Consumer Proposal Payments?

You can’t file another consumer proposal and may need to declare bankruptcy

Having your creditors accept your proposal is only the first step towards resolving your financial difficulties. Many people who enter into a consumer proposal have so much difficulty keeping up with monthly payments that their proposal collapses. Once that happens, they’re left in limbo being unable to file another proposal and having to consider other options, including bankruptcy.

A couple reviews their debt consolidation options while sitting on a couch with a laptop.

Debt Consolidation Options
A Consumer Proposal Is One of Many

You may not need to file for a consumer proposal. Explore other options that are available to you

Just like with other debt consolidation options, a consumer proposal is a good fit for some people, but not for everyone. It depends on a number of things including if someone is working, the type of debts they have, how much they owe and their overall financial situation.

Contact Us for More Information About Consumer Proposals

To help you figure out if filling a consumer proposal is the best option for you, contact us to find out about all of your debt consolidation options. One of our counsellors will be happy to look over your whole financial situation carefully and answer your questions. Speaking with our certified Counsellors is always free, confidential and without obligation. 

Related Topics

Getting Rid of Debt

We’re happy to help you figure out your options. There are more than you might think.

Insolvency Options

Canada has 2 insolvency options, a consumer proposal or bankruptcy. Find out how they stack up.

Credit Counselling

Are you curious about what credit counselling is or how it works? Here’s what you need to know.