Consumer Proposal in Canada
A consumer proposal is the only debt settlement program backed by the Canadian government. It is essentially a deal put in place with creditors to eliminate overwhelming debts.
You will work with a Licensed Insolvency Trustee to determine how much you can reasonably afford to pay back each month. Your trustee will then negotiate with your creditors to strike a deal as to how much this monthly payment should be. As a highly experienced firm in filing consumer proposals, Spergel has helped over 100,000 individuals become debt free.
A consumer proposal is a form of debt relief regulated by the Bankruptcy and Insolvency Act set out by the Canadian government. It is an affordable way to gain relief from overwhelming monthly debt payments while avoiding bankruptcy, and filing a consumer proposal also means you can keep your assets. In Canada, a consumer proposal is filed by a Licensed Insolvency Trustee. Based on the agreement made by your trustee, you will repay creditors a percentage of the amount owed, while receiving clearance from the remaining debt. At Spergel, you will receive your own Licensed Insolvency Trustee to walk you through each step of filing a consumer proposal.
In order to file a consumer proposal, you will need to find an experienced Licensed Insolvency Trustee – at Spergel, we have been helping Canadians gain debt relief for over thirty years. Your trustee will discuss with you your financial circumstances, and work with you to understand how much you should offer to pay your creditors, based on what you can afford to repay on your debts. They will then negotiate with your creditors to agree on an amount they wish to receive. In most cases, creditors would rather receive some repayment through a consumer proposal than none should a debtor file bankruptcy. Learn more about how to file a consumer proposal.
Who can file for a consumer proposal?
In Canada, you are eligible to file a consumer proposal if you meet the following criteria:
- You are unable to pay your debt at the time it is owed; and
- Your unsecured debt is not worth over $250,000 (separate from a mortgage); and
- You live or own property in Canada; and
- You are either a Canadian citizen, a permanent resident, on a Canadian work permit, on a student visa, or have other immigration status.
To learn more about how other Canadians have experienced consumer proposals, take a look at our consumer proposal reviews. To see if you’re eligible to reduce your debt by up to 80% by filing a consumer proposal in Ontario, take our debt freedom calculator.
What assets can you keep when filing a consumer proposal?
In Canada, a consumer proposal is a preferential form of debt relief as you are able to keep most of your assets. This includes personal belongings, property assets, a vehicle, and RRSPs (aside from any RRSP contributions made in the last year). In Ontario, this makes a consumer proposal particularly beneficial to anyone with equity in their home, a new or second vehicle, or that wants to keep savings and investments. The only condition with vehicles and homes is that you must continue to make your monthly mortgage or car loan payments. This makes filing a consumer proposal more advantageous than the restrictions associated with filing bankruptcy.
Which debts can be included in a consumer proposal in Canada?
Debts that can be included in a consumer proposal are most unsecured debts. This is inclusive of the following types of debt:
- Credit card debt
- Unsecured lines of credit
- Bank loans
- Personal loans
- Payday loans
- Tax debts
- Some types of student loan debt (provided you have been out of school for at least seven years)
Types of debt not included in a consumer proposal in Canada include:
- Secured credit – including mortgages and secured car loans, although these assets may be kept if it is possible to maintain their monthly payments
- Some types of student loan debt – including for those who have not been out of school for over seven years. An experienced Licensed Insolvency Trustee can help to determine if it is best to eliminate other types of debt to make student loans affordable, or to wait the seven years.
Why do people file a consumer proposal?
A consumer proposal can be declared for various reasons, and primarily as an alternative to bankruptcy. It may be that it is a struggle to make your monthly debt payments, or that your debts have become unmanageable and overwhelming. Often, it can take a trigger to realise that it would be very difficult to pay back your debts without support from a Licensed Insolvency Trustee. Other reasons for filing a consumer proposal include having a lawsuit pursued against you, or being persistently contacted by creditors. Life events like medical bills or going through a divorce can also have huge financial impacts in paying back debt. Learn more about the advantages of filing a consumer proposal with an experienced Canadian debt relief firm like Spergel.
Eli’s Path to Debt Freedom
After cashing out an RRSP to pay for his wedding. Eli received an unexpected tax bill. With his other debts he could not afford to pay and eventually the debt grew. CRA decided to initiate a wage garnishment. We helped Eli avoid bankruptcy with a Consumer Proposal. Debt consolidation saved Eli’s pay cheque and his Consumer Proposal taught him to plan for unexpected expenses in the future.
Frequently Asked Questions
How long does a consumer proposal last?
Generally, consumer proposals in Canada are 3 to 5 years. You may pay off your consumer proposal sooner or even make a lump sum offer. However, the maximum amount of time you have to pay off your consumer proposal is 5 years.
Consumer Proposal vs. Bankruptcy
A Consumer Proposal gives you the flexibility to consolidate all your debts into one affordable fixed monthly payment. It allows you to keep all your assets, including any equity in your home and freezes any interests on your debts. You decide what you can afford that offers a fair return to your creditors – based on your current earnings, not your future ones.
Debt Help Learning Centre
If you’re just starting to explore your options, visit our learning centre to learn from our articles and resources to start on your path to debt freedom, and when you’re ready, our trustees are always available to listen.