What is a consumer proposal in Canada?
In short
A consumer proposal is a formal arrangement under the federal Bankruptcy and Insolvency Act. Working with a Licensed Insolvency Trustee, you offer to repay a portion of what you owe over a period of up to five years. If enough creditors accept, the arrangement binds them all and unsecured collection activity stops.
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Who can file one?
Only a Licensed Insolvency Trustee can file a consumer proposal. Trustees are licensed federally by the Office of the Superintendent of Bankruptcy, and their fees are set by regulation rather than negotiated with you at the table.
The route generally suits someone who owes more than they can realistically repay in full but who has regular income to fund monthly payments. Without steady income, a trustee will walk through the other options with you at no cost, because a proposal only works if the payments you offer are ones you can actually keep making.
What debts does it cover, and what does it leave out?
A consumer proposal covers unsecured debts — the kind of debt where the creditor has no claim on a specific asset. Credit cards, lines of credit, unsecured personal loans and some tax debt typically fall inside it.
Secured debts such as a mortgage or a car loan sit outside it, because the lender can still look to the asset itself. Some obligations, including most support payments and certain court fines, are not released by a proposal at all. A trustee will go through your specific list of debts with you before anything is drafted.
Are you a fit for a consumer proposal?
There is no online quiz that can answer this for you — a trustee assesses your actual numbers — but a few structural facts narrow it down before that conversation even starts.
What a trustee will look at
- Debt type
- Unsecured — credit cards, lines of credit, unsecured loans, some tax debt
- Income
- Regular income steady enough to fund the monthly payment you offer
- Who files it
- Only a Licensed Insolvency Trustee, licensed by the Office of the Superintendent of Bankruptcy
- First meeting
- A first consultation with a trustee costs nothing
What happens step by step after you file?
The process runs through the same trustee from first call to final payment. Nothing here is negotiated by a referral service — every step below is carried out by the Licensed Insolvency Trustee you choose to work with.
The proposal process
- 01
Free consultation
A Licensed Insolvency Trustee reviews your debts, income and assets and explains every option available, not only a proposal.
- 02
The trustee drafts the terms
If a proposal fits your situation, the trustee prepares what you offer to repay and over what period, up to a maximum of five years.
- 03
The proposal is filed
Filing with the Office of the Superintendent of Bankruptcy puts a stay of proceedings in place, which stops most unsecured collection activity.
- 04
Creditors vote
The creditors covered by the proposal vote on whether to accept it. If enough of them accept, the arrangement binds every covered creditor.
- 05
You pay the trustee
You pay the trustee on the schedule set out in the proposal, for up to five years, and the trustee distributes the money to your creditors.
How does it compare with bankruptcy?
Both are federal insolvency proceedings filed by the same kind of professional — a Licensed Insolvency Trustee — and both trigger a stay of proceedings. What differs is what you keep, how long it runs, and how it is reported.
Consumer proposal vs bankruptcy
| Consumer proposal | Bankruptcy | |
|---|---|---|
| Who files it | A Licensed Insolvency Trustee | A Licensed Insolvency Trustee |
| What happens to your assets | You generally keep them | Assets above your province's exemption limits are surrendered to the trustee |
| How long it runs | A maximum of five years | Ends with a discharge; timing depends on your circumstances |
| How long it stays on your credit file | Removed 3 years after all included debts are paid, or 6 years after signing, whichever comes first | A first bankruptcy: 6 years after discharge (7 at TransUnion in NL, ON, PE and QC); more than one: 14 years |
Who files it
- Consumer proposal
- A Licensed Insolvency Trustee
- Bankruptcy
- A Licensed Insolvency Trustee
What happens to your assets
- Consumer proposal
- You generally keep them
- Bankruptcy
- Assets above your province's exemption limits are surrendered to the trustee
How long it runs
- Consumer proposal
- A maximum of five years
- Bankruptcy
- Ends with a discharge; timing depends on your circumstances
How long it stays on your credit file
- Consumer proposal
- Removed 3 years after all included debts are paid, or 6 years after signing, whichever comes first
- Bankruptcy
- A first bankruptcy: 6 years after discharge (7 at TransUnion in NL, ON, PE and QC); more than one: 14 years
How is the trustee paid?
Trustee fees are set by federal regulation rather than quoted or negotiated. They are paid out of the payments you make into the proposal itself — there is no separate up-front bill for filing.
The first consultation, before you file anything, costs nothing. That meeting is where a trustee explains what your fees would look like given your own numbers, so you can compare it against the other routes before committing to one.
What does it do to your credit file?
A consumer proposal is a public filing and it is reported to the credit bureaus. The figures below come from the Financial Consumer Agency of Canada; ask the trustee to confirm exactly what will be reported on your own file before you agree to anything.
Credit-report retention
- Consumer proposal
- Removed 3 years after all included debts are paid off, or 6 years after signing, whichever comes firstFinancial Consumer Agency of Canada
- Late or unpaid credit cards and loans (before filing)
- Kept for up to 6 yearsFinancial Consumer Agency of Canada
What if too many creditors reject it?
Creditors vote on the proposal as filed. If it is rejected, the trustee can discuss an amended offer with you, or explain the alternatives available given your situation. Rejection does not automatically make you bankrupt — that is a separate decision you would make with the trustee afterward.
Where can you get free help deciding?
The Office of the Superintendent of Bankruptcy maintains a public directory of Licensed Insolvency Trustees and plain-language pages explaining consumer proposals and bankruptcy side by side. Reading both before your first call means you arrive with better questions, not fewer options.
Frequently asked questions
- Does a consumer proposal cover all my debts?
- It covers unsecured debts. Secured debts such as a mortgage or a car loan sit outside it, and some obligations including most support payments and certain court fines are not released. A trustee will go through your specific list with you.
- Can the trustee change the offer if creditors reject it?
- Yes, that is a normal next step. The trustee can discuss an amended proposal with you and put a revised version back to your creditors, rather than treating a first rejection as final.
- Do I pay the trustee up front?
- Trustee fees are set by federal regulation and are paid out of the payments you make into the proposal, not as a separate up-front charge. The first consultation costs nothing.
- What happens to debts I share with someone else?
- A proposal only deals with your own obligation to the creditors it covers. A co-signer or joint debtor generally remains responsible for their share unless that creditor separately agrees otherwise, so it is worth telling the trustee about any joint debts up front.
- Is a consumer proposal public information?
- Yes. It is filed with, and recorded by, the Office of the Superintendent of Bankruptcy as a matter of public record. A trustee can explain what that means in practice for your own circumstances.
- Can I keep using credit while a proposal is in effect?
- That depends on your existing accounts and on any lender you approach for new credit — it is not something a proposal itself grants or blocks. Ask the trustee what to expect for the accounts you actually hold.