Frequently Asked Questions (FAQs)

Eligibility and Debt

Most unsecured debts qualify, including credit cards, lines of credit, personal loans, payday advances, and unpaid tax balances. Secured debts like a car financing plan or mortgage fall under different rules if you intend to keep those assets. A Licensed Insolvency Trustee will review your specific list to confirm eligibility.

There is no separate upfront fee paid directly to a Licensed Insolvency Trustee for administering a consumer proposal. Trustee fees are regulated and are paid from the amount you agree to pay through the proposal. Your monthly payment depends on your income, debts, assets and what your creditors are likely to accept.  

Under Canadian insolvency law, you must generally owe at least $1,000 and be unable to meet your financial obligations as they become due. A consumer proposal is available to individuals with up to $250,000 in debt, excluding a mortgage secured by a principal residence. Whether it makes sense depends on your overall financial situation. 

Yes. In most cases, income tax debt owed to the Canada Revenue Agency can be included in a consumer proposal. Once the proposal is filed, collection action on included unsecured debts generally stops. Some tax situations can be more complex, so a Licensed Insolvency Trustee should review your specific CRA debt before you file.

No. Both are formal debt-relief options administered by a Licensed Insolvency Trustee, but they work differently. A consumer proposal involves making an agreed payment to creditors and generally allows you to keep your assets. Bankruptcy involves different rules around assets, income and discharge. An LIT can explain which option better fits your circumstances.  

It depends on your financial situation. Debt consolidation combines debts into one new loan and usually requires repayment of the full balance plus interest. A consumer proposal is a formal legal process that may reduce how much you repay. A Licensed Insolvency Trustee can compare both options and explain which may be more appropriate. 

In most cases, you can keep your home when you file a consumer proposal, provided you continue making your mortgage payments. Your home equity is considered when determining what creditors may accept, but unlike bankruptcy, a consumer proposal generally allows you to retain your assets while making the agreed proposal payments.

A consumer proposal will affect your credit record, but it does not remain there permanently. Generally, it is removed three years after you complete the proposal or six years after you sign it, whichever comes first. You can begin rebuilding your credit by establishing responsible borrowing and payment habits over time.

Generally, yes. Once a consumer proposal is filed, unsecured creditors included in the proposal must stop most collection action, including lawsuits and wage garnishments. Creditors should deal with your Licensed Insolvency Trustee instead of contacting you for payment on those debts, provided the proposal remains in force. 

A consumer proposal is filed by an individual, so your spouse does not automatically become part of your proposal and their credit is not directly affected. However, if you have joint debts or your spouse co-signed or guaranteed a debt, the creditor may still pursue them for the amount they are legally responsible for.

In most cases, yes. A consumer proposal generally allows you to keep your assets, including your vehicle. If the car is financed or leased, you will usually need to continue making the required payments to the secured lender. Your Licensed Insolvency Trustee will review the vehicle and loan as part of your overall financial situation. 

A consumer proposal can last for up to five years. The length and payment schedule are based on the terms negotiated with your creditors and your ability to pay. Some proposals are completed sooner, particularly if you are able to make additional payments or pay the remaining balance early. 

Yes. A consumer proposal can generally be paid off early if you have the funds available. Completing it sooner can also start the clock earlier on having the proposal removed from your credit report. Before using new borrowing to pay it off, speak with your Licensed Insolvency Trustee about the potential costs and risks.  

Missing a payment does not necessarily end your proposal immediately, but falling behind by the equivalent of three monthly payments can cause a consumer proposal to be deemed annulled. If you are struggling to make payments, contact your Licensed Insolvency Trustee as soon as possible to discuss your options.  

If your proposal is not accepted, it does not automatically mean you have to declare bankruptcy. Your Licensed Insolvency Trustee may be able to amend the proposal and resubmit it or help you consider other debt relief options. Creditors generally have 45 days after filing to respond or request a meeting.  

Yes. In Ontario, a creditor can take legal steps to garnish your wages. Generally, 80% of your net wages are protected from garnishment, although different rules can apply in certain circumstances. Filing a consumer proposal generally stops existing wage garnishments related to unsecured debts included in the proposal. 

It may be possible to obtain new credit while you are in a consumer proposal, although approval and interest rates will depend on the lender. Credit cards with balances included in your proposal will generally be cancelled. Some people use a secured or low-limit credit card to begin rebuilding credit responsibly.  

A Licensed Insolvency Trustee is federally licensed and regulated and is the only professional authorized to administer consumer proposals and bankruptcies in Canada. A debt consultant cannot file these proceedings and may charge additional fees. You can speak directly with an LIT without paying a debt consultant to act as an intermediary. 

Student loans can be included in a consumer proposal, but special rules apply. Generally, government student loan debt is not automatically released unless you stopped being a student at least seven years before filing. A Licensed Insolvency Trustee can review when you finish your studies and explain how your student loans would be treated.  

Yes. Payday loans are generally unsecured debts and can usually be included in a consumer proposal along with credit cards, lines of credit and other unsecured loans. Once the proposal is filed, included payday lenders must stop collection action and deal with your Licensed Insolvency Trustee instead.  

If you stop paying your credit cards, interest and late fees may continue to accumulate, your credit rating can be affected, and the account may eventually be sent to collections. A creditor may also take legal action to recover the debt. If you cannot keep up, it’s best to explore your options early.

In most cases, yes. A consumer proposal generally allows you to keep your assets, including RRSP savings. However, the value of your assets is considered when determining what creditors may be willing to accept. Your Licensed Insolvency Trustee will review your RRSPs and other assets when preparing the proposal.

Yes. Self-employed individuals and sole proprietors may be able to file a consumer proposal if they meet the eligibility requirements. Business and personal debts may both need to be reviewed. A Licensed Insolvency Trustee can assess your income, tax obligations, business assets and debts to determine whether a consumer proposal is appropriate.

Usually, no. A consumer proposal is filed through a Licensed Insolvency Trustee, who prepares the documents, files the proposal and communicates with your creditors. Most consumer proposals are completed without appearing in court, although a creditor meeting or court involvement can occur in some circumstances.

Once you have completed all required payments and conditions, your Licensed Insolvency Trustee issues a Certificate of Full Performance. This confirms that you have completed the proposal. You should keep the certificate and provide it to the credit bureaus if necessary, so your credit file can be updated accurately.

A consumer proposal must be filed through a Licensed Insolvency Trustee. The LIT reviews your income, expenses, assets and debts, helps develop an offer to your creditors and files the required documents with the Office of the Superintendent of Bankruptcy. Once filed, legal protection from most unsecured creditors generally begins.

There is no standard waiting period. Timing depends largely on how quickly your financial information can be reviewed and the proposal prepared. Once you and your Licensed Insolvency Trustee have completed the required documents and the proposal is filed, the stay of proceedings protecting you from most unsecured collection action takes effect.

No. Creditors have 45 days to respond. If no meeting is requested within that period, the proposal is generally deemed accepted. If a meeting is held, voting is based on the dollar value of proven claims, and a majority of the votes cast determines whether the proposal is accepted.

Usually not. A creditors’ meeting is only required in certain circumstances, including when creditors representing at least 25% of the proven claims request one within 45 days, or when the Office of the Superintendent of Bankruptcy directs that one be held. If a meeting is required, you must attend.

Yes. Consumer proposals are part of Canada’s official bankruptcy and insolvency records. Basic information about a filing can be found through the Office of the Superintendent of Bankruptcy’s insolvency-record search. That does not mean your complete personal financial information or the details of your everyday finances are publicly posted.

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