Understanding Consumer Proposals

Senga Bailey
May 29, 2023


A consumer proposal is a formal agreement between you and your creditors to pay your debt over time. It’s initiates a Stay of Proceedings which  prevents creditors from taking legal action against you, such as garnishing wages or seizing assets.

A consumer proposal isn’t the same thing as bankruptcy, A consumer proposal lets you pay off debt while still keeping some of your assets, represents a better alternative than bankruptcy because you are able to make some payments towards your debt load, requires regular payments of a fixed amount and has a less severe effect on your credit score.

How do I get one?

To enter into  a consumer proposal, you will need to contact a licensed trustee and provide them with financial information. The Licensed Insolvency trustee will review your financial information and put together a  proposal, the creditors will determine if it is accepted or rejected. If the proposal is accepted, then you will make monthly payments until the proposal has been paid completely.

Who can file a consumer proposal?

Consumer proposals are only available to Canadian citizens and permanent residents who owes $250,000 or less excluding amounts owed under a residential mortgage 

Advantages of presenting a proposal to creditors

  • When you recognize that you can afford to pay part, but not all, of your debts, a Proposal is a better alternative than a bankruptcy and, at the same time, provides a means of dealing reasonably with financial difficulties.
  • If a Consumer Proposal is rejected by creditors, it does not result in automatic bankruptcy. (There are sometimes situations where bankruptcy is not an option, such as where bankruptcy would result in the requirement to resign from a profession, or lose a broker’s license.)
  • An automatic Stay of Proceedings goes into effect upon filing a Consumer Proposal. The Stay prevents unsecured creditors from proceeding with legal or collection action while the Proposal is dealt with. This may be important where you are under threat of garnishment or other legal proceedings.
  • A Proposal is very much like a loan consolidation. It generally results in one monthly payment being made, and therefore eliminates the need to deal with a number of creditors at the same time

Disadvantage of presenting a proposal to creditors

  • You may have to make payments for over a longer period of time than  you would If bankrupt 

Consumer proposals are an alternative to personal bankruptcy.

A consumer proposal is an alternative to bankruptcy. The two are similar in that they both provide financial relief to debtors who can’t afford to repay their debts in full, but they work differently:

  • A Proposal represents a better alternative than bankruptcy when a debtor is able to make some payments towards his debt load.


Consumer proposals are becoming more common in Canada. If you’re considering filing one, make sure you know the pros and cons of this option by reaching out to our trusted team of professionals.