Is a consumer proposal worth it?

Posted on 10 December 2021

Written by Colin Boulton

If you have discovered this article, you are probably interested in filing a consumer proposal. Perhaps you are searching for the advantages and disadvantages of consumer proposals. There is a lot to review before going ahead with a consumer proposal, from fully understanding the filing process to finding the right Licensed Insolvency Trustee to support you through it. At this stage, you are likely in need of having to act soon to deal with your debt. Life is too short to spend worrying about debt, and so the sooner it is tackled, the sooner you can rest easy. In this article, we will explain the basic principles of a consumer proposal, and how you can gain debt relief and stop collection agencies for good. In the right circumstances, consumer proposals can be life changing. So, is a consumer proposal worth it? In many cases, yes!

What is a consumer proposal?

Many Canadians are unaware of consumer proposals, believing bankruptcy to be the only way forward to clear debt and move on. Yet there are a number of forms of debt relief out there, depending on your unique financial circumstances. A consumer proposal is an increasingly popular bankruptcy alternative in Canada. It is the only debt settlement program supported by the Canadian government and regulated by the Bankruptcy and Insolvency Act. It is the process of putting a deal in place with your creditors to clear your unsecured debts by up to 80%. It makes repaying your debt much more manageable and affordable by allowing you to put forward an amount that works for you. A Licensed Insolvency Trustee is required to file a consumer proposal, and they will review your financial circumstances to advise you and guide you through the process. Your trustee will also work to negotiate with your creditors to try and strike a deal that works for you. Unlike other bankruptcy firms, at Spergel you are assigned your very own trustee to walk you through the entire consumer proposal process, instead of being passed from person to person. Ultimately, your creditors would rather agree to a consumer proposal than lose out via a bankruptcy. Learn more about the differences between a consumer proposal and a bankruptcy.

Why file a consumer proposal?

If you are considering filing a consumer proposal, there are a few key reasons why you may want to. The objective of a consumer proposal is to allow you to begin a fresh financial future as soon as possible by negotiating with your creditors to reduce your debt by up to 80%. A form of debt relief that is backed by the Canadian government, it is the only legal form of debt settlement. Generally speaking, there are a growing number of Canadians choosing to file a consumer proposal over bankruptcy. In fact, 70% of Canadians choose a consumer proposal over bankruptcy as their preferred debt relief solution. In this article, we will explore the pros and cons of a consumer proposal to help you consider ‘is a consumer proposal worth it?’

The advantages of a consumer proposal

So, is a consumer proposal worth it? There are many reasons to suggest that yes, it really can change your financial situation and allow you to start afresh. The top advantages of a consumer proposal include the following over other forms of debt relief:

  1. Your unsecured debts are reduced by up to 80%
  2. You can avoid surplus income, unlike filing bankruptcy where monthly payments can become very expensive
  3. You make one affordable monthly payment
  4. As soon as you file, any interest and penalties are frozen
  5. You can keep your assets with a consumer proposal, including your car, property equity, and investments – in bankruptcy, you must surrender any non-exempt assets
  6. Fixed payment terms, even if your financial situation improves throughout the consumer proposal
  7. Full protection from creditors thanks to a stay of proceedings, which will end collection calls and stop wage garnishments
  8. You will become debt free in a maximum of five years
  9. You will avoid bankruptcy, which can be important if it would impact your employment or professional certifications
  10. Your credit score will be repaired sooner with a consumer proposal than bankruptcy
  11. You can up skill in budgeting and saving for the future through the compulsory credit counselling sessions that come with filing a consumer proposal

The risks of a consumer proposal

Is a consumer proposal worth it? Although consumer proposals are becoming a increasingly popular debt relief solution in Canada, they are not suitable for everyone. Here are the disadvantages of filing a consumer proposal over other forms of debt relief:

  • Consumer proposals most often take longer to complete than a bankruptcy, although it is possible to pay it off early
  • Your credit score will take an impact with a R7 note on your credit report for up to 6 years from filing. Check out our tips for rebuilding your credit score and keeping a credit card with a consumer proposal
  • Your creditors could reject your consumer proposal. Learn what to do if your consumer proposal gets rejected
  • Some debts are not covered in a consumer proposal. These include secured debts, child support payments, fines, and fraud related debts

If you do not have a significant income or any assets, filing bankruptcy may be a better option for you. If you are unsure of which to choose, you should speak to a reputable Licensed Insolvency Trustee about your circumstances and they will advise you on the most suitable option for you.

How do you go about filing a consumer proposal?

If you have decided that the answer to ‘is a consumer proposal worth it?’ is yes, it is simple to begin the filing process. The first step is to meet with an experienced Licensed Insolvency Trustee. They are the only professionals in Canada legally able to file all forms of debt relief, and are regulated by the Canadian government. They will first want to collect some information from you, either in person or over the phone. At Spergel, unlike other bankruptcy firms, you will be assigned your own Licensed Insolvency Trustee instead of being passed from person to person. We will learn more about your income, what you owe, to which creditors, and any assets you may have. Once we have formed a picture of your financial situation, we will meet with you to let you know about the options available to you. If a consumer proposal looks to be the best option for you, we will walk you through the process and can work to estimate how your monthly payments may look given your budget. If a consumer proposal is not the most appropriate for you, we will explore other options like perhaps a bankruptcy or a debt consolidation loan instead. We are here to walk you through each step of the debt relief process. Learn more about how you can live a life free from financial burdens in life after consumer proposal.

If you are wondering ‘is a consumer proposal worth it?’, book a free consultation with Spergel. Our Licensed Insolvency Trustees have helped over 100,000 Canadians gain debt relief, many through consumer proposals. We will work with you to get you on the path to financial freedom, and will explain all there is to know about filing a consumer proposal. The sooner you act, the sooner you will be free from financial stress and worry.


Colin Boulton

Colin Boulton is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on unemployment and wage garnishments and manages Spergel's offices in Eastern Ontario (including Oshawa, Peterborough, Lindsay, Ajax and Scarborough). When not at the office helping clients cross their debt-free finish lines, Colin enjoys training for and participating in triathlons.

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