What To Say When Debt Collectors Call

According to a 2023 report by the Financial Consumer Agency of Canada (FCAC), two-thirds of mortgage holders report having trouble meeting their financial commitments, and the percentage of mortgage holders spending more than they earn was the highest it has been since the survey began in August 2020. This phenomenon, known as “house rich, cash poor,” is increasingly affecting Canadians as inflation and interest rates climb, and the cost of living stretches household budgets. As a result, many homeowners are searching for ways to stay afloat without selling their homes. That’s where reverse mortgages come in – and why they’re being heavily marketed across the country.

But before you sign on the dotted line and borrow against your home, it’s worth understanding all your options. At Spergel, we’ve helped over 100,000 Canadians eliminate their debt and keep their homes without the long-term costs of a reverse mortgage. For many, filing a consumer proposal instead is the smarter, safer solution.

Understanding the “house rich, cash poor” dilemma

Homeownership is often seen as a symbol of financial stability. But for many Canadians, the reality is far different. They may have hundreds of thousands of dollars in home equity, but very little liquid cash. Credit card balances, personal loans, tax debt, and unexpected expenses add up fast. And when you’re on a fixed income or dealing with job instability, those monthly payments become unmanageable.

Graeme Hamilton, a Licensed Insolvency Trustee at Spergel, explains:
“Many Canadians are finding themselves in a difficult position where their homes have appreciated, but they have little disposable income to handle daily expenses. This is particularly concerning when dealing with high-interest debt, which can quickly erode any remaining financial flexibility.”

This scenario is especially common among:

• Retirees relying on pension or CPP
• Adults helping financially dependent children and/or parents
• Those recently impacted by illness, divorce, or job loss
• Homeowners facing high-interest debt with limited repayment options

If this sounds familiar, you’re not alone. And you do have options. Here’s what you may be considering if you’re house rich, cash poor.

Reverse mortgages: a popular, but pricey solution

Reverse mortgages are marketed as an easy fix: stay in your home, receive a lump sum or monthly income, and never make payments until you sell or pass away. It sounds appealing – especially if you’re struggling to meet monthly bills or indeed are house rich, cash poor.

But, as with most things that sound too good to be true, there’s a catch. Actually, several:

• Compounding interest: interest on a reverse mortgage accrues over time and is added to the loan balance. This means your debt grows the longer you live in the home.
• Reduced inheritance: as your loan balance grows, your home equity shrinks. This leaves less for your estate and your family.
• Early repayment penalties: if you decide to sell or move out, you could face significant fees.
• Fees and closing costs: reverse mortgages come with set-up costs, legal fees, and appraisal fees that reduce your total payout.
• Loss of flexibility: a reverse mortgage locks you into a contract that may not adapt well if your circumstances change.

In short, you’re borrowing your own money at a high cost. It’s not always the best choice for long-term financial stability.

What if I have a HELOC or mortgage?

Many Canadians exploring debt relief options still owe money on their mortgage or have ahome equity line of credit (HELOC). The good news? You can still file a consumer proposal. Here’s what you need to know:

So if you own your home and are making mortgage or HELOC payments, you can still file a consumer proposal to deal with your unsecured debt. You continue to pay your secured debts (mortgage and HELOC) as usual while freezing interest and stopping collection activity on everything else. This allows you to avoid tapping further into your home equity, while protecting your credit and your home. Plus, without the stresses of paying off your unsecured debts, you’ll likely find it much easier to make your mortgage or HELOC payments. It can be an ideal option for those who are house rich, cash poor.

What is a consumer proposal?

A consumer proposal is a legal, government-regulated debt solution filed through a Licensed Insolvency Trustee (LIT), like our professionals here at Spergel. It allows you to negotiate a structured repayment plan with your creditors, often reducing your debts by up to 80% while allowing you to keep your home. A consumer proposal means you pay back the full amount of your unsecured debt – but without interest, penalties, or collection actions.

That means:

• No interest on your balances
• No more collection calls or wage garnishments
• One affordable monthly payment
• No impact to your home equity

You keep your house. You pay your debts. And you regain control over your finances.

When does a consumer proposal make sense?

We recommend a consumer proposal for individuals who:

• Have significant unsecured debt (e.g., credit cards, payday loans, tax debt)
• Own a home with strong equity
• Want to protect their assets
• Can afford to repay the full amount of their debt if interest is stopped

This is often a great fit for those who are being pressured to get a reverse mortgage or second mortgage to stay afloat. A consumer proposal is a cleaner, more empowering solution with fewer long-term drawbacks.

Why choose Spergel?

At Spergel, we’re not just administrators of debt solutions – we’re advocates for your financial wellbeing. Our Licensed Insolvency Trustees work directly with you, from start to finish. No call centres, no outsourcing, and no judgment. Unlike other bankruptcy firms, you’ll be assigned your very own Licensed Insolvency Trustee to walk you through the end to end debt relief process, without being passed from person to person.

We’ve seen firsthand how Canadians can feel trapped by their debt, especially when their greatest asset – their home – is tied up in equity they can’t access without strings attached. That’s where our approach makes a difference to help those who are house rich, cash poor:

• We negotiate with your creditors to create a proposal that works for everyone
• We protect your home and your dignity
• We eliminate interest and harassment, letting you breathe again
• We walk with you every step of the way until you’re debt-free

Real results, real Canadians

The Thompson family’s story shows how filing a consumer proposal with Spergel helped them avoid the costly long-term impact of a reverse mortgage.

In 2023, a wildfire devastated the Thompsons’ home and bakery in British Columbia. With over $250,000 in debt and no income, they faced the risk of losing everything, including their home. Though they could have accessed their home’s equity through a reverse mortgage, the family chose Spergel’s alternative: a consumer proposal.

Spergel negotiated a 70% debt reduction, lowering their debt to just $75,000, with a manageable repayment plan of $500 per month. This allowed them to keep their home, reopen their bakery, and rebuild their lives. Within months, the Thompsons were back on track and are now set to complete their repayment ahead of schedule.

This story highlights how a consumer proposal can offer a safer, more sustainable path than a reverse mortgage, protecting home equity while providing long-term financial relief.

“When the wildfire destroyed our home and business, we had nowhere to turn. Spergel’s team reduced our debt by 70%, giving us a manageable plan to repay what we owed. Thanks to them, we’re thriving again.” — Mr. Thompson, British Columbia

Discover more Success Stories of Canadians we’ve helped, and see our 3,500+ client reviews.

Still unsure? Let’s talk.

Reverse mortgages may be the right tool in very specific situations. But for many Canadians, especially those who are house rich, cash poor and looking to protect their home and get a handle on debt, a consumer proposal offers a smarter, safer path. Book your free, confidential consultation with Spergel today. No pressure. No obligation. Just real help from people who care. You don’t have to trade your equity to find peace of mind.

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What is a reverse mortgage?

A reverse mortgage allows homeowners aged 55 or older to access the equity in their home without having to sell. Essentially, it’s a loan where the homeowner receives funds, and the loan is repaid when the homeowner sells the home or passes away. While it seems like a convenient way to tap into the value of your property without monthly payments, reverse mortgages have significant downsides that can hurt your long-term financial wellbeing.

Why reverse mortgages aren’t always the best option

While reverse mortgages may seem like an easy solution for homeowners looking to access their home equity, they come with several significant downsides. Here’s why a reverse mortgage might not be the right choice for everyone.

Rising debt over time

The biggest issue with reverse mortgages is the accrual of interest. Unlike traditional mortgages, where you pay interest each month, interest on a reverse mortgage is added to the loan balance. Over time, this means that the amount you owe increases significantly. In fact, depending on interest rates, the amount you owe could double in as little as 10 to 15 years, which dramatically reduces the equity in your home.

Costs and fees

Reverse mortgages come with high setup fees, including legal and appraisal fees, which can be significant. These costs are often added to your loan balance, meaning you end up borrowing more than you initially anticipated.

Reduced inheritance

Since the loan balance grows over time, the equity left in your home diminishes, leaving less to pass on to your heirs. If you want to leave a legacy for your family, a reverse mortgage may not align with your long-term financial goals.

Limited flexibility

If your situation changes and you need to move or sell your home sooner than expected, reverse mortgages can come with penalties. This makes it less flexible than other debt management options that don’t tie you to your home’s equity.

What is a consumer proposal?

A consumer proposal is a formal, government-approved solution for managing unsecured debt, such as credit card balances, personal loans, and tax debt. It’s an agreement between you and your creditors where you pay back a portion of what you owe over a fixed period (usually 3-5 years). The terms of the proposal are designed to be manageable based on your financial situation, and you’ll only pay what you can afford – with no interest or added fees. It can often reduce your debt by up to 80%.

Unlike a reverse mortgage, a consumer proposal allows you to keep your home without using its equity. Instead of borrowing more, you settle your debts for less, which helps you regain control over your finances and protects your property from being used as collateral.

Why a consumer proposal is often a better solution than a reverse mortgage

For homeowners struggling with debt, a consumer proposal can offer a more sustainable and flexible solution compared to a reverse mortgage. Here’s why many find a consumer proposal to be the better option.

Protect your home equity

A reverse mortgage depletes your home equity, which can leave you with limited assets down the road. In contrast, a consumer proposal allows you to keep your home’s equity intact while addressing your unsecured debts. This ensures your home remains an asset for your future.

Lower long-term costs

With a reverse mortgage, you’re paying for the privilege of borrowing your own money, with interest compounding over time. In contrast, a consumer proposal typically results in a reduction in your overall debt, with affordable monthly payments and no interest. This makes it a far less expensive option over the long term.

Avoid high fees

Reverse mortgages come with hidden fees and interest charges, which can eat into the amount of money you receive. A consumer proposal, on the other hand, is a transparent process with clearly defined costs, allowing you to keep more of your assets and make payments on terms you can manage.

Financial flexibility

Unlike reverse mortgages, which lock you into a contract that can be difficult to break, consumer proposals are flexible. If your financial situation improves, you can pay off your proposal early without penalties, allowing you to regain your financial independence more quickly.

Comprehensive debt relief

While a reverse mortgage may only help with cash flow, it doesn’t address the underlying issue of debt. A consumer proposal consolidates all your unsecured debts into one manageable payment, offering a fresh start without losing your home.

When is a reverse mortgage the right option?

For some homeowners, a reverse mortgage may be a short-term solution to access cash without selling their home. It’s important, however, to weigh the long-term costs and consider how it will affect your financial future. If you’re primarily concerned with maintaining your home, a consumer proposal can provide a more stable financial future without the risks associated with reverse mortgages.

How Spergel can help

At Spergel, we specialize in debt relief solutions that help homeowners navigate financial difficulties without sacrificing their homes. If you’re considering a reverse mortgage, it’s essential to understand all of your options. Our experienced Licensed Insolvency Trustees can help you explore whether a consumer proposal is the better fit for your situation.

Real results: how Spergel helped Jenna overcome gambling debt

Jenna, in her mid-50s, found herself buried in debt due to a gambling addiction. Unable to manage her mounting credit card bills and loans, she turned to Spergel for help. Instead of opting for a reverse mortgage, which would have drained her home equity, Jenna chose a consumer proposal.

Spergel negotiated a 70% debt reduction, allowing Jenna to keep her home and regain financial control. With a manageable repayment plan in place, Jenna is on track to complete her proposal and secure a stable future.

“Spergel helped me reduce my debt by 70% and gave me the chance to rebuild my financial life. I now have a clear path forward.” — Jenna, Ontario

Discover more of our Success Stories, and over 3,500 positive client reviews.

Get help today

If you’re struggling with debt and considering a reverse mortgage, contact Spergel today to explore how a consumer proposal can provide the relief you need without sacrificing your home’s equity. Book your free, confidential consultation now to find out how we can help you achieve long-term financial freedom.

What to read next

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• Missed mortgage payment – what are the consequences?
• Mortgage renewal: what should I do?
• Mortgage help in Canada: programs available to those struggling to make mortgage payments
• Should I use home equity to pay off debt?

The good news is that, for most Canadians, filing for bankruptcy or a consumer proposal has little to no impact on their job. Your employer typically won’t be notified, and Canadian laws protect you from being fired solely because of insolvency. There are, however, exceptions – certain professions, particularly those in finance, law, and government, may have disclosure requirements or additional considerations. Understanding how bankruptcy or a consumer proposal could affect your job is an important step in making an informed decision about your financial future.

For more insights on managing debt while maintaining job security, listen to Your Debt and Your Job, a podcast episode from Moolala, featuring Rob Kilner, a Licensed Insolvency Trustee at Spergel. He shares expert advice on handling debt-related employment concerns, whether you’re currently employed or looking for a job.

In this article, we’ll break down whether your employer will find out, how different careers may be affected, and what steps you can take to protect your professional future if you choose to file for bankruptcy or a consumer proposal.

What does filing a consumer proposal or bankruptcy mean for your job?

For the vast majority of people, filing a consumer proposal or bankruptcy will not impact their employment in any way. As Rob Kilner, one of our Licensed Insolvency Trustees, puts it: “99 times out of 100, nothing will impact your job whatsoever.”

There are, however, exceptions, primarily for individuals who work in financial roles or positions of trust. If you handle money, work in the banking industry, or hold a fiduciary position, your employer may require a credit check as part of the hiring process. While you’re not obligated to inform your employer about your bankruptcy or consumer proposal if you’re already employed, financial disclosure requirements could come into play in regulated professions.

If you’re unsure whether filing will impact your role, speaking with a trusted HR professional can be a helpful step. They can provide clarity on whether your employer has any policies regarding personal insolvency and help you explore alternative options if needed. This proactive approach allows you to make informed decisions about debt relief without jeopardizing your career.

Can your employer fire you for filing bankruptcy or a consumer proposal?

No. Under Canadian law, your employer cannot fire you simply because you’ve filed for bankruptcy or entered into a consumer proposal. The Bankruptcy and Insolvency Act (BIA) protects individuals seeking debt relief from discrimination. Employers are generally not even notified unless your job involves specific financial responsibilities (such as in banking or accounting).

Will my employer find out about my bankruptcy or consumer proposal?

For most people, bankruptcy or a consumer proposal remains a private matter. There are, however, a few circumstances where your employer might find out:

• Wage garnishments: if your wages are currently being garnished due to unpaid debts, filing for bankruptcy or a consumer proposal will stop the garnishment. Your employer may be notified that they no longer need to deduct funds from your pay.
• Professional licenses and background checks: if you work in a regulated profession, such as finance, insurance, or law, your licensing body may require disclosure. Some employers also conduct periodic credit checks, which could reveal your filing.
• Payroll deduction requirements: if you owe money directly to your employer and your bankruptcy or consumer proposal affects that debt, they will be notified as a creditor.

How does filing bankruptcy or a consumer proposal affect specific jobs?

While most jobs remain unaffected, certain professions may have specific rules around bankruptcy and financial stability:

Financial industry and banking

If you work in banking, investment management, or insurance, your employer may have policies regarding personal insolvency. Regulatory bodies such as the Mutual Fund Dealers Association (MFDA) or the Insurance Council of Canada may require disclosure.

Government and security clearance jobs

Public sector jobs, particularly those requiring security clearance, may involve financial background checks. Bankruptcy does not automatically disqualify you, but you may need to explain your situation.

Licensed professionals (lawyers, accountants, real estate agents)

Some professional associations require members to report financial insolvency. If you hold a trustee or fiduciary role, restrictions may apply until you are discharged.

Self-employed and business owners

If you run a business, filing bankruptcy may impact your ability to secure business credit or loans. A consumer proposal might be a better option to avoid restrictions on business operations.

What can you do to protect your career?

If you’re worried about the impact of bankruptcy or a consumer proposal on your job, here’s how you can manage the situation:

• Speak with a Licensed Insolvency Trustee: they can provide expert advice on how to proceed without affecting your career. At Spergel, our team of experienced Licensed Insolvency Trustees have been helping Canadians to gain debt relief for over 35 years.
• Understand your employer’s policies: if you work in a regulated profession, check with your licensing body about disclosure requirements.
• Consider a consumer proposal: if maintaining good credit is important for your job, a consumer proposal might be a better option than bankruptcy.
• Be proactive about financial recovery: rebuilding credit and financial stability after insolvency shows responsibility and planning.

What can an employer ask in an interview?

Employers may inquire about your financial background if the job involves financial responsibility, access to company funds, or handling sensitive financial data. In such cases, a credit check may be required as part of the hiring process. If an employer does ask, it’s important to understand the reasoning behind their question:

• If it’s related to fraud or financial misconduct, this could raise red flags for an employer. A history of financial wrongdoing might make them hesitant to hire someone for a role involving money management.
• If it was due to a significant life event, such as divorce, illness, or job loss, you can frame it in a responsible way. A strong response could be: “like many people, I faced an unexpected life event that put financial pressure on me. Rather than ignoring the situation, I took proactive steps to resolve it through a consumer proposal/bankruptcy. Since then, I have rebuilt my financial stability and continue to manage my finances responsibly.”

Employers appreciate honesty and accountability. If your financial situation was a result of an unavoidable life circumstance, explaining how you handled it responsibly can demonstrate resilience and problem-solving skills – qualities that are valuable in any role.

Does filing bankruptcy or a consumer proposal affect your job? FAQs

Here are some of the most common questions we receive on whether or not filing bankruptcy or a consumer proposal affects your job:

What is the downside of a consumer proposal?

The main downside of a consumer proposal is that it impacts your credit score, typically resulting in an R7 rating on your credit report, which stays for up to six years from the date of filing (or three years after completion). While it allows you to avoid bankruptcy, it still requires a structured repayment plan, which may take up to five years to complete. Additionally, not all creditors have to accept your proposal, and if more than 50% of your creditors reject it, you may need to renegotiate or consider other debt relief options. However, compared to bankruptcy, a consumer proposal allows you to keep your assets and can be a more manageable way to resolve debt.

What happens when a customer files for bankruptcy?

When a customer files for bankruptcy in Canada, their assets and debts are placed under the control of a Licensed Insolvency Trustee (LIT), who oversees the process. Most unsecured debts, such as credit card balances and personal loans, are discharged, meaning the person is no longer legally required to repay them. However, certain debts – like child support, alimony, student loans (if less than seven years old), and court fines – are not included in bankruptcy.

For creditors, this means they may receive only a portion of what they are owed, depending on the liquidation of the bankrupt individual’s eligible assets. If a business relies on that customer for payments, they may need to write off the debt as uncollectible. Additionally, bankruptcy stays on a person’s credit report for six years (or longer if it’s a second bankruptcy), making it difficult for them to obtain new credit in the short term.

What is the 2 2 2 rule for consumer proposal?

The 2-2-2 rule is a common guideline lenders use to assess mortgage eligibility for individuals who have recently completed a bankruptcy discharge or a consumer proposal. It outlines three key criteria borrowers should meet to improve their chances of qualifying for a mortgage:

1. 2 years discharged – you must wait at least two years after being discharged from bankruptcy or completing your consumer proposal before most lenders will consider your mortgage application. This period allows you to rebuild your credit history and demonstrate financial responsibility.
2. 2 new credit accounts – you should establish at least two active credit accounts, such as a secured credit card, unsecured credit card, or a small personal loan. These accounts help demonstrate your ability to manage credit responsibly.
3. $2,000 minimum credit limits – each credit account should have a minimum limit of $2,000, and you must maintain a good repayment history by making on-time payments and keeping your credit utilization low (ideally below 30% of the limit).

The easiest way to start rebuilding credit is by obtaining a secured credit card, where you provide a deposit that acts as collateral. If possible, choose a card with a higher limit ($2,000+) to optimize your credit utilization ratio, which is a major factor in your credit score. Gradually, as you demonstrate good financial habits, you may qualify for unsecured credit and eventually meet lender requirements for mortgage approval. By following the 2-2-2 rule, you can systematically rebuild your credit and increase your chances of securing a mortgage at a competitive interest rate in the future.

Does consumer proposal affect sponsorship?

A consumer proposal does not automatically disqualify you from sponsoring a family member for immigration to Canada. However, Immigration, Refugees and Citizenship Canada (IRCC) requires sponsors to meet financial stability criteria, and a consumer proposal could affect how your financial situation is assessed. If your debts are under control and you’re making regular payments, it’s unlikely to be an issue. However, if your proposal includes government debts or significantly lowers your disposable income, it could impact your eligibility. It’s best to consult an immigration professional to ensure you meet IRCC requirements.

Can sponsorship debt be forgiven?

Sponsorship debt – such as money owed to the government for sponsoring a family member under Canada’s family sponsorship program – cannot be included in a consumer proposal or bankruptcy. If a sponsor fails to provide financial support as required under their sponsorship agreement, the government may seek repayment, and this debt remains legally enforceable. Sponsors are still responsible for repaying the amount owed, even if they experience financial hardship. The only way to resolve sponsorship debt is to negotiate a repayment plan with the government or pay it in full.

What is the success rate of a consumer proposal?

The success rate of a consumer proposal in Canada is very high, with over 97% of proposals being accepted by creditors. This is because Licensed Insolvency Trustees (LITs) work with you to create a reasonable repayment plan that meets creditor expectations while remaining affordable for you. At Spergel, we’re proud to maintain a 99% acceptance rate on any consumer proposals we file. Unlike other bankruptcy firms, at Spergel, you’re assigned your very own Licensed Insolvency Trustee to walk you through the end to end debt relief process, instead of being passed from person to person. Once a consumer proposal is approved, as long as you make your agreed payments, it is legally binding, and you will be debt-free once completed. However, if you miss three payments, the proposal is annulled, and creditors can resume collection efforts.

The bottom line

For most Canadians, filing for bankruptcy or a consumer proposal will not affect their job. Employers generally don’t receive notification, and Canadian law protects against job loss due to insolvency. Certain professions, however, have additional considerations, so it’s essential to seek professional advice tailored to your specific situation. For further insights, listen to Your Debt and Your Job, where our Licensed Insolvency Trustee Rob Kilner shares expert advice on how debt can impact your career.

If you’re struggling with debt and worried about how it could affect your job, Spergel’s Licensed Insolvency Trustees can help. We’ve helped thousands of Canadians regain financial freedom while protecting their careers. Book a free consultation today to explore your options.

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What is a consumer proposal?

A consumer proposal is a legal form of debt relief that is an agreement between a debtor and their creditors. A popular alternative to bankruptcy, it is an affordable way to clear the majority of your debts while allowing you to keep your assets. It’s available to individuals with unsecured debts of up to $250,000 excluding a mortgage on a primary residence. A consumer proposal must be filed by a Licensed Insolvency Trustee, the only professional legally able to administer all forms of debt relief in Canada. In a consumer proposal, the individual agrees to pay a percentage of their total debts over a period of up to five years. Once accepted, a consumer proposal provides protection from collection efforts and stops creditors from charging additional interest. Learn more about the advantages of filing a consumer proposal.

Can a consumer proposal be rejected?

Yes, creditors have the right to reject or negotiate the terms of a consumer proposal. For the proposal to be accepted, creditors holding at least 51% of the value of the debt must agree to its terms. If the majority of creditors don’t accept the proposal, they may either reject it outright or request changes:

Rejection by majority vote

Creditors who hold a majority of the debt value must agree to the proposal for it to pass. If they vote against it, the consumer proposal will be rejected.

Amendments or counteroffers

Creditors may reject the initial terms but make a counteroffer, suggesting alternative terms. You can then decide whether to accept these new terms or go back to the negotiating table.

Why are consumer proposals rejected?

Understanding the reasons behind consumer proposal rejections can help you to avoid common pitfalls. Here are a few reasons creditors might reject a proposal:

Inadequate payment offer

Creditors may reject a consumer proposal if they feel that the offer is too low or that they are not receiving enough to justify accepting it. Proposing a fair payment amount based on your financial situation is crucial, and a good Licensed Insolvency Trustee should help you to do this.

Inconsistent financial history

Creditors may scrutinize your financial history, including your past debt payments and credit usage. A history of missed payments or high-risk financial behaviour could impact their willingness to accept the proposal.

Unrealistic budget

A key part of a consumer proposal is demonstrating a realistic repayment plan. If creditors feel that your budget doesn’t allow for the proposed payments, they might reject the offer. A Licensed Insolvency Trustee can help you create a budget that creditors view as feasible.

High debt-to-income ratio

If your debt-to-income ratio is exceptionally high, creditors may see the proposal as unsustainable. To improve your chances, consider working with your LIT to assess how much you can realistically commit to repaying.

Insufficient disclosure of financial situation

Transparency is crucial when submitting a consumer proposal. Failing to disclose assets, sources of income, or other debts can lead to distrust among creditors, resulting in rejection. Be honest about your financial circumstances to improve your proposal’s chances.

What happens if your proposal is rejected?

If your proposal is rejected, don’t panic. You have a few options:

1. Negotiate with creditors. If creditors reject your proposal, your LIT can attempt to negotiate new terms that are acceptable to both parties.
2. Adjust the proposal terms. You may be able to revise the proposal based on creditor feedback. For example, you might increase the monthly payments or adjust the repayment period to align with creditors’ expectations.
3. Consider bankruptcy as a last resort. While a consumer proposal is preferable for many due to its lower impact on credit, bankruptcy is an option if creditors continue to reject your proposal. A LIT can help you weigh this decision.

How to improve your chances of consumer proposal approval

If you’re worried about your proposal being rejected, here are some ways to make it more appealing to creditors:

Work closely with a Licensed Insolvency Trustee

A Licensed Insolvency Trustee can assess your financial situation and help you draft a proposal that creditors are more likely to accept. A LIT’s expertise can guide you through each step and increase your chances of a successful outcome.

Offer a realistic payment amount

Creditors are more likely to accept a consumer proposal that offers a fair payment based on your budget and income. Working with a LIT can help you determine a reasonable amount that satisfies creditors and fits within your means.

Provide full financial transparency

Being transparent about your finances builds trust. Disclose all sources of income, debts, and assets so that creditors can see the full picture. Credibility can play a large role in their decision to accept your proposal.

Explain unusual circumstances

If you’ve experienced unique circumstances – such as a job loss, medical expenses, or other life events that impacted your finances – explaining these situations in your proposal can help creditors understand your position better.

Why choose Spergel for your consumer proposal?

At Spergel, we know that navigating a consumer proposal can be challenging. Our team of Licensed Insolvency Trustees has helped over 100,000 Canadians regain control of their finances. For over 35 years, we have provided a customized approach, assisting clients in creating strong consumer proposals that creditors are more likely to accept. With a focus on transparency and understanding, we’re here to support you every step of the way.

Can a consumer proposal be rejected? FAQs

Here is one of the most commonly asked questions we receive about consumer proposal rejections:

What percentage of consumer proposals are accepted?

The vast majority of consumer proposals in Canada are accepted, with approximately 99% of Spergel’s consumer proposals being approved by creditors. This high acceptance rate is largely due to the involvement of experienced Licensed Insolvency Trustees, who help debtors create proposals that align with creditors’ expectations and financial realities. By carefully assessing an individual’s financial situation, a LIT increases the likelihood of the proposal meeting creditor requirements, which significantly contributes to this high success rate.

If you’re considering a consumer proposal, book a FREE consultation with Spergel today. Our experienced LITs can help you assess your options and create a consumer proposal that works for you. Don’t let debt control your life – let us guide you toward financial freedom.

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What is debt consolidation?

Debt consolidation involves combining multiple high-interest debts into a single loan, usually with a lower interest rate. By doing this, you simplify your debt payments and often reduce the overall interest you’re paying.

How does debt consolidation work?

Debt consolidation works by combining multiple high-interest debts, such as credit cards or personal loans, into a single loan with a lower interest rate. There are a number of ways to consolidate your debts, but the most common option is to take out a debt consolidation loan. This simplifies your finances by giving you just one monthly payment to manage, potentially reducing the overall interest you pay. While debt consolidation doesn’t reduce the total amount you owe, it can make repayment more manageable and help improve your credit score if you make timely payments. Once your lender approves your loan, you use the funds you receive to pay off your high-interest debts in one go, and you then make monthly payments over an agreed time period to pay off your debt consolidation loan. Do note, however, that you typically need a good credit rating to qualify for a consolidation loan.

Pros of debt consolidation

Here are the primary advantages of taking on a debt consolidation loan:

1. Simplified payments – instead of juggling multiple creditors and due dates, you make one monthly payment, which can reduce stress and minimize the risk of missed payments.
2. Lower interest rates – with a debt consolidation loan, you may secure a lower interest rate than what you’re currently paying on credit cards or other debts, saving you money over time.
3. Improved credit score – if you make timely payments, your credit score can gradually improve.

Cons of debt consolidation

On the other hand, here are some of the disadvantages of debt consolidation that you may wish to consider when it comes to debt consolidation vs consumer proposal:

1. Qualification requirements – to be approved for a consolidation loan, you usually need good credit. If your credit score has already been affected by missed payments, getting approval can be challenging.
2. No debt reduction – while you may benefit from lower interest rates, debt consolidation doesn’t reduce the principal amount of what you owe.
3. Risk of re-borrowing – debt consolidation only works if you manage your finances carefully moving forward. There’s a risk that you may continue accumulating debt if your spending habits don’t change.
4. Sometimes require a co-signer or an asset – consolidation loans are sometimes given on the condition that they need to be secured by either a major asset (like your home), or a co-signer. If you fail to make your payments, your asset might be seized, or your co-signer will need to make the payments on your behalf.

What is a consumer proposal?

A consumer proposal is a formal debt relief option administered by a Licensed Insolvency Trustee (LIT). It allows you to negotiate with your creditors to pay back a portion of what you owe over a set period – usually up to five years. Unlike bankruptcy, you are still responsible for some portion of your debts, but the repayment is reduced and spread out over manageable payments. At Spergel, we have a 99% acceptance rate on any consumer proposals that we file.

How does a consumer proposal work?

A consumer proposal is a legal agreement between you and your creditors, facilitated by a Licensed Insolvency Trustee. It allows you to settle your unsecured debts by paying back a portion of what you owe (sometimes as little as 20%), typically over a period of up to five years. Once the proposal is filed, interest stops accumulating, and creditors are legally required to stop collection efforts. If the majority of your creditors accept the proposal, all creditors are bound by its terms, allowing you to make affordable, fixed monthly payments while keeping your assets.

Pros of a consumer proposal

Here are the primary advantages of a consumer proposal for gaining debt relief:

1. Reduction of total debt – a consumer proposal can reduce the overall amount you owe, sometimes by up to 80%. This makes it much more manageable than paying the full balance through a consolidation loan.
2. Legal protection from creditors – once a consumer proposal is filed, a stay of proceedings is automatically generated. This means that creditors are legally required to stop harassing you, garnishing your wages, or taking other legal actions.
3. No interest accumulation – unlike with debt consolidation, once your consumer proposal is accepted, interest on your outstanding debt stops accumulating.
4. Keep your assets – in a consumer proposal, you retain control of your assets, unlike in bankruptcy, where certain assets might be seized.

Cons of a consumer proposal

On the other hand, the following considerations should be made when it comes to filing a consumer proposal:

1. Impact on credit – a consumer proposal will negatively affect your credit score, and it remains on your credit report for up to six years after completion.
2. Length of process – the process can take several years to complete, depending on the terms agreed with your creditors, although you can make early repayments if you’re able to.
3. Limited to unsecured debt – consumer proposals only apply to unsecured debt, such as credit card debts and personal loans, but not to secured debts like mortgages or car loans.

What is the difference between a debt consolidation and a consumer proposal?

The key distinction between a consumer proposal and a consolidation loan is that a loan consolidates multiple debts into one payment with lower interest but doesn’t reduce the overall amount you owe. A consumer proposal, on the other hand, not only consolidates your unsecured debts into one manageable monthly payment but also stops interest charges and can reduce your total debt by up to 80%. If you’re unsure which option suits your unique financial circumstances, it is always best to consult a reputable Licensed Insolvency Trustee to determine the best path forward for you.

When is debt consolidation the best option?

If you think you can pay off your debts when they’re simplified and with potentially a reduced interest rate, debt consolidation might be the best option for you. It has the ability to take a number of different loans like high interest credit card debts and condense them into a lower interest secured loan that is backed by collateral, like your home. When considering a debt consolidation loan, you should carefully think about your long-term financial circumstances. For instance, can your debts be included in a consolidation loan? Will you be able to take on a new consolidation loan with your current credit score? Will you be able to afford a new loan’s monthly payments? These are all important considerations to make before committing to a debt consolidation loan.

When is a consumer proposal the best option?

If you don’t think you can repay all of your debt plus interest, a consumer proposal is likely a better choice than debt consolidation. It’s often a more preferential option than bankruptcy if you have a steady income and don’t want to lose your assets. Ultimately, it’s a good choice if you are facing insolvency or have a poor credit score that won’t enable you to take on a debt consolidation loan, if you need to reduce your debt, and if you want to be protected from creditor actions like collection calls, wage garnishments, and legal action.

Debt consolidation vs consumer proposal: which is best for you?

Choosing between debt consolidation and a consumer proposal depends on your unique financial situation.

• If you have a stable income and a relatively good credit score but are struggling with high-interest debt, debt consolidation may be the right option. It allows you to streamline payments and potentially save on interest without harming your credit score.
• If your debt load is unmanageable and you’re struggling to make even the minimum payments, a consumer proposal may be the better choice. While it affects your credit in the short term, it offers significant debt reduction, stops interest accumulation, and provides legal protection from creditors.

Debt consolidation vs consumer proposal: FAQs

Here are some of the most commonly asked questions we receive about choosing between debt consolidation vs consumer proposal:

Which is better, consumer proposal or debt consolidation?

The choice between a consumer proposal and debt consolidation depends on your unique financial situation. Debt consolidation is better if you have a manageable debt load, good credit, and want to reduce high-interest rates without affecting your credit score. A consumer proposal is a better option if your debt is overwhelming, as it reduces the total amount owed and stops interest accumulation, though it has a greater impact on your credit. Consulting a Licensed Insolvency Trustee can help you decide which is best for your specific needs.

Is it better to consolidate or settle debt?

Whether it’s better to consolidate or settle debt depends on your financial situation and goals. Debt consolidation is ideal if you can manage your debts but need lower interest rates and simplified payments, as it doesn’t reduce the amount owed. Debt settlement, on the other hand, is better if you’re struggling to repay your debts, as it allows you to negotiate with creditors to reduce the total amount you owe. However, settling debt can negatively impact your credit score. Weighing these options based on your financial standing can help you decide the best course of action.

What is the downside of a consumer proposal?

The downside of a consumer proposal is its impact on your credit score, as it remains on your credit report for up to six years after completion, making it harder to obtain new credit during that time. Additionally, while it reduces your overall debt, a consumer proposal typically takes several years to complete. It also only applies to unsecured debts, so secured debts like mortgages or car loans are not included. Lastly, if your creditors reject the proposal, you may need to explore other options like bankruptcy.

Do creditors usually accept consumer proposals?

Yes, creditors usually accept consumer proposals if they believe it offers a better return than other options, such as bankruptcy. A proposal must be accepted by the majority (in dollar value) of your creditors, and if it’s reasonable – meaning it offers a fair repayment plan based on your financial situation – creditors are often inclined to approve it. Once accepted by the majority, all creditors are legally bound by the terms of the proposal.

Both debt consolidation and consumer proposals offer a path toward financial stability, but they serve different purposes depending on the severity of your debt. If you’re unsure of the best route for your situation, seeking advice from a Licensed Insolvency Trustee can help you find the most appropriate solution. Take the first step toward a brighter financial future. Reach out to us here at Spergel today for a free consultation.

What to read next

• How to get debt consolidation help for bad credit
• How does debt consolidation work?
• What is the difference between consumer proposal and debt consolidation?
• Consumer proposal vs credit counselling: which is best?
• Debt management vs debt settlement – what’s the difference?

• What is unsecured debt?
• Consumer proposal FAQs: general overview
  • What is a consumer proposal?
  • Who is eligible for a consumer proposal?
  • How does a consumer proposal affect my credit?
  • What are the benefits of a consumer proposal?
• Consumer proposal FAQs: process and filing
  • How do I file a consumer proposal?
  • What debts can be included in a consumer proposal?
  • Can I include tax debt in a consumer proposal?
  • How much does a consumer proposal cost?
  • What is the acceptance rate of a consumer proposal?
  • Can I leave a creditor out of my proposal?
  • How soon will I know if my consumer proposal has been accepted?
  • Who can help to file a consumer proposal?
  • Why am I still receiving statements and why does it show payments being made?
  • Why are my creditors still taking payments and/or interest accruing in my old bank account that I still have access to?
  • Do you do my income taxes?
  • Are my student loans included?
  • When are my 45 days up?
• Consumer proposal FAQs: payments and terms
  • How much will I have to pay in a consumer proposal?
  • How long does a consumer proposal last?
  • What happens if I miss a consumer proposal payment?
  • Can I pay off a consumer proposal early?
  • Will my creditors accept a consumer proposal?
  • Can I have credit while in a consumer proposal?
• Are you going to take my GSTs?
  • Can I change my payments?
  • How can I find out the remaining balance on my consumer proposal and/or when the next payment is due?
• Consumer proposal FAQs: rights and protection
  • Will I lose my assets in a consumer proposal?
  • When will I be protected from my creditors?
  • What do you lose in a consumer proposal?
  • What do I do when a creditor is calling?
  • Why am I still getting collection letters?
• Consumer proposal FAQs: impact and consequences
  • What is the downside of a consumer proposal?
  • How will a consumer proposal affect my future credit applications?
  • What cannot be included in a consumer proposal?
  • Why are my debts still showing on my credit report?
  • How do I fix my creditor report?
  • What happens if my proposal is not accepted?
• Consumer proposal FAQs: responsibilities

What is unsecured debt?

Unsecured debt refers to loans or credit that are not backed by collateral, meaning the lender has no specific asset to claim if you were to default. Common examples include credit card debt, personal loans, and medical bills. Because it is not secured by property or assets, unsecured debt typically comes with higher interest rates and carries greater risk for lenders, which can result in higher costs for borrowers.

Consumer proposal FAQs: general overview

What is a consumer proposal?

A consumer proposal is a formal, legally binding process where you make an offer to your creditors to settle your unsecured debts. The proposal typically involves paying back a portion of your total debt over an agreed period. The payment terms are negotiated by a Licensed Insolvency Trustee (LIT) on your behalf.

Who is eligible for a consumer proposal?

You are eligible for a consumer proposal if:

• Your total unsecured debts do not exceed $250,000 (excluding a mortgage on your primary residence).
• You have a stable source of income to make regular payments.
• You are unable to repay your debts in full but want to avoid bankruptcy.

How does a consumer proposal affect my credit?

Filing a consumer proposal will negatively impact your credit rating. It will be recorded on your credit report as an R7 rating, which indicates that you have entered into a formal debt settlement plan. This rating will remain on your credit report for three years after the proposal is completed.

What are the benefits of a consumer proposal?

Consumer proposals have a number of key advantages, including the following:

• Avoid bankruptcy: a consumer proposal is an alternative to bankruptcy, which often has more severe consequences.
• Debt reduction: creditors often agree to settle for less than the total amount you owe – often reducing your debt by up to 80%.
• Legal protection: once the proposal is filed, creditors can no longer take legal action against you, garnish your wages, or contact you for payments.
• Affordable payments: the payment plan is based on what you can afford, ensuring that the debt settlement does not put you under additional financial stress.

Consumer proposal FAQs: process and filing

How do I file a consumer proposal?

To file a consumer proposal, you must work with a Licensed Insolvency Trustee (LIT), who will assess your financial situation, develop a consumer proposal, and negotiate with your creditors on your behalf. Your trustee will also guide you through the legal process and handle all necessary paperwork.

What debts can be included in a consumer proposal?

A consumer proposal covers unsecured debts, such as:

• Credit card debt
• Personal loans (note that this does not include loans from friends or family; rather, it refers to loans from recognized lenders)
• Lines of credit
• Payday loans
• Income tax debt

However, it cannot include secured debts like a mortgage or car loan, nor can it include court fines, alimony, or child support.

Can I include tax debt in a consumer proposal?

Yes, tax debt owed to the Canada Revenue Agency (CRA) can be included in a consumer proposal. The CRA is often open to accepting proposals, as long as they see that it’s a fair and reasonable offer based on your financial situation.

How much does a consumer proposal cost?

To gain creditor approval, your consumer proposal must offer more than what they would likely receive if you filed for bankruptcy. When deciding the payment amount, your Licensed Insolvency Trustee will evaluate:

• Your assets and income to estimate what creditors could collect in a bankruptcy scenario.
• Your budget to ensure the proposed payments are manageable for you.

There are no hidden or upfront fees when it comes to a consumer proposal. Your Licensed Insolvency Trustee is compensated from the funds agreed upon in your proposal, meaning the cost of filing is included within your regular payments, and not an additional expense.

What is the acceptance rate of a consumer proposal?

To create a successful consumer proposal, the following points are essential:

• Your offer must provide creditors with more than they would obtain through bankruptcy.
• It should satisfy the basic requirements of your creditors.
• The payment plan must be one you can realistically maintain.

At Spergel we’re proud to have a 99% approval rate for the consumer proposals we submit.

Can I leave a creditor out of my proposal?

No, you’re not able to decide which creditors you include and exclude from your consumer proposal. Consumer proposals are able to clear unsecured debts, like credit card debt, payday loan debts, tax debts, and lines of credit. You’re not able to clear debts from secured creditors like mortgage lenders or car dealerships. Some other debts – including child support, alimony, court fines, penalties, and student loan debts less than 7 years old – are also unable to be settled by a consumer proposal.

How soon will I know if my consumer proposal has been accepted?

After your Licensed Insolvency Trustee files your consumer proposal, it will be shared with your creditors. Creditors then have 45 days from the date of filing to vote for or against the proposal. During this time, negotiations can occur with any creditor who votes against your consumer proposal. A majority must vote for your proposal in order for it to be accepted. If most creditors with a majority of the dollar amount owed vote against the proposal, there will usually be a meeting of creditors to decide whether or not a revised consumer proposal would be considered, or if it will be rejected. 

Who can help to file a consumer proposal?

Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief. This means only a Licensed Insolvency Trustee can help you to file a consumer proposal. With their extensive training, qualifications, experience, and knowledge of the Bankruptcy and Insolvency Act, they are well placed to advise you on the best form of debt relief for your unique financial circumstances.

Why am I still receiving statements and why does it show payments being made?

Some creditors may continue to send you statements during the term of your proposal. This is because their computer systems prepare and send these automatically. Provided that you have already included this debt in your listing of debts, you do not need to be concerned, and you do not need to advise us this happened.

Why are my creditors still taking payments and/or interest accruing in my old bank account that I still have access to?

We strongly recommend opening a new bank account at a new bank to prevent unwanted withdrawals from accounts that have been included in your bankruptcy/proposal. If you owe money to your current bank, it takes time for them to update the bank’s computer software that automatically withdraws money from the designated account once you cease making payments. Once you complete your bankruptcy/proposal, the account along with any interested accrued will be extinguished.

Do you do my income taxes?

No, in a proposal, it is your responsibility to complete and file your own income tax returns.

Are my student loans included?

If it has been at least seven years since you were either a full or part time student, your student loans would be included in your consumer proposal. If it hasn’t been seven years, you will be responsible to pay this debt, which will accumulate interest while you are in the proposal. It is important to note that Spergel does not have the ability to confirm the last time that you were a full or part time student. If you are unsure of this date, please be sure to contact your student loan lenders and ask them this question.

When are my 45 days up?

We will send your paperwork to the Office of the Superintendent of Bankruptcy; they will provide us with a Certificate of Filing a consumer proposal. You can start counting your 45 days once we receive the certificate of filing.

Consumer proposal FAQs: payments and terms

How much will I have to pay in a consumer proposal?

The amount you pay in a consumer proposal is determined by your income, assets, and what your creditors are willing to accept. Typically, you’ll end up paying a portion of your total debt, which is lower than what you initially owed – often just 20% of your total debt. A Licensed Insolvency Trustee will help you to negotiate these terms with your creditors.

How long does a consumer proposal last?

The repayment period for a consumer proposal can last up to five years, though you can pay it off sooner if your financial situation improves. It’s important to note that consumer proposals are interest free, no matter how long your proposal term is.

What happens if I miss a consumer proposal payment?

If you miss more than three payments during the term of the proposal, it may be considered in default. At that point, the consumer proposal may be annulled, and creditors could resume collection efforts, including wage garnishments.

Can I pay off a consumer proposal early?

Yes, you can pay off your consumer proposal early without penalties. Doing so will allow you to rebuild your credit sooner and move on from your debt obligations.

Will my creditors accept a consumer proposal?

For your consumer proposal to be accepted, creditors who hold the majority of your debt (at least 51%) must agree to the terms. If accepted, the proposal becomes binding for all unsecured creditors. If the proposal is rejected, your trustee can renegotiate the terms or explore other options, such as bankruptcy.

Can I have credit while in a consumer proposal?

Contrary to popular belief, yes, you can have credit while in a consumer proposal. If, however, you have found yourself with unmanageable debt that has led to needing a consumer proposal, you should hesitate before taking on more credit. It’s often best to wait several months or even years before taking out credit again.

Are you going to take my GSTs?

No, GST credits will continue to be forwarded to you if you are entitled to them.

Can I change my payments?

Your proposal payments are like a mortgage or car payment. The payments automatically come out of your bank account every month. Create your budget with this expectation. If you bank account changes, please contact us to update your payment agreement as soon as possible to ensure you do not miss any payments. Keep in mind that if you are three months in arrears on your proposal payments, then your proposal will be annulled, and your creditors’ rights will be revived.

How can I find out the remaining balance on my consumer proposal and/or when the next payment is due?

We encourage you to speak with your Estate Administrator and/or Licensed Insolvency Trustee. They will have this information.

Consumer proposal FAQs: rights and protection

Will I lose my assets in a consumer proposal?

Unlike in bankruptcy, you generally won’t lose your assets, such as your home or car, when filing a consumer proposal, provided you continue to make payments on secured debts like your mortgage or auto loan.

When will I be protected from my creditors?

As soon as your Licensed Insolvency Trustee files your consumer proposal, a stay of proceedings will be automatically generated. This puts an immediate end to any creditor contact, collection activity, wage garnishments, and any legal action.

What do you lose in a consumer proposal?

In a consumer proposal, you generally don’t lose any assets, unlike in bankruptcy. However, it impacts your credit rating, and the proposal will remain on your credit report for up to three years after completion. You also commit to making regular payments, which can limit your disposable income during the repayment period.

What do I do when a creditor is calling?

You are protected from collection activity from your creditors during your proposal. As such, they are not allowed to continue collection calls after your proposal has been filed. In the unlikely event that you do continue to receive collection calls, we ask that you:

• Tell the creditor that you have filed for your consumer proposal with Spergel and give them the contact information for your Administrator.
• Provide your creditor with your “estate number”. This is an individual number assigned to each bankruptcy or proposal filed in Canada. To find this number look at the top of almost any form that we have sent you. An estate number typically looks like this: 32-234567.
• If they continue calling, call us and talk with your Administrator. For us to stop the call, we will need to know the name of the company that is calling. Please note that certain creditors may be allowed to call you for collections. Although this is uncommon, this can happen if:
  • You owe money for child/spousal/family support and fall behind in these payments.
  • You have decided to keep secured debt (e.g., your mortgage or car payments) and fall behind on these payments. These creditors are not included in your proposal, so you will need to make arrangements with them.

Why am I still getting collection letters?

It has been our experience that the vast majority of creditors respect the insolvency process and will cease collection activities once they are notified. However, it can take upwards to 6-8 weeks for creditors to cease calls and/or sending correspondence. If a creditor continues to make collection attempts, your administrator can contact them directly.

Consumer proposal FAQs: impact and consequences

What is the downside of a consumer proposal?

The main downside of a consumer proposal is its negative impact on your credit score, as it remains on your credit report for up to three years after completion. On the contrary, by accumulating debt, your credit score likely needed improvement anyway and filing a consumer proposal is the first step to rebuilding your credit. At Spergel, we’re here to help you with this. Additionally, while a consumer proposal can reduce your debt, you still need to make regular payments, and missing payments can result in the proposal being cancelled. It can also take longer to pay off compared to other options like bankruptcy, although it is much easier to keep your assets.

How will a consumer proposal affect my future credit applications?

While a consumer proposal stays on your credit report for three years after completion, many people find that they can begin rebuilding their credit during this time. Once the proposal is complete, you can start applying for new credit, but it may be at higher interest rates until your credit improves.

What cannot be included in a consumer proposal?

A consumer proposal cannot include secured debts, such as mortgages or car loans, as these are tied to specific assets. Additionally, it doesn’t cover court-ordered fines, alimony, child support payments, or student loans if the loans are less than seven years old. Only unsecured debts like credit card debt, personal loans, and tax debt can be included.

Why are my debts still showing on my credit report?

Your debts are not extinguished until you complete the terms of your proposal. Should you not complete the proposal, your creditors’ rights will be revived, and they will be able to pursue collection of their debt.

How do I fix my creditor report?

If there are errors or items not reported correctly on your credit report, complete a dispute form or request an investigation with the credit bureau. Complete the online form/paper copy forms along with any supporting documents required. It is your responsibility to ensure the credit bureaus are reporting accurately on your report. The credit bureaus are required to provide you with a free copy of your credit report once per year upon request.
You can get the request forms from their websites: www.transunion.ca and/or www.consumer.equifax.ca

What happens if my proposal is not accepted?

If your proposal is rejected, we will discuss your options. One option is filling for bankruptcy. Please keep in mind that we monitor your proposal during the initial 45-day period. If creditors respond back with a counteroffer, we will contact you to discuss the counteroffer to see if you are able to pay more into your proposal. If you are able to, we can amend your proposal to decrease the chances of rejection.

Consumer proposal FAQs: responsibilities

Which duties do I need to undertake to complete my consumer proposal?

Should your consumer proposal be accepted, you have a few duties to undertake – all of which are fairly straightforward:

1. You need to make your agreed payments on time, as set out in your consumer proposal.
2. You need to attend two credit counselling sessions.
3. You need to comply with any other requirements laid out in your consumer proposal – your Licensed Insolvency Trustee will explain these thoroughly if they apply.

You will receive a Certificate of Full Performance upon completion of your consumer proposal, and your debts will be legally discharged. At this point, you’re free to enjoy life after a consumer proposal.

What are the differences between a consumer proposal and bankruptcy?

Here are some of the key differences between a consumer proposal and bankruptcy:

• You do not need to surrender your assets in a consumer proposal, including your home, car, and any tax refunds.
• You can reduce your debt by up to 80% in a consumer proposal, while in a bankruptcy, it is eliminated.
• Monthly payments are often lower in bankruptcy.
• A consumer proposal requires the approval of your creditors through a voting process, while bankruptcy is automatic although your creditors can oppose your discharge.
• Payments in a consumer proposal are negotiated up front and remain the same throughout your proposal term. Bankruptcy payments are defined by law and can increase if your income increases – also known as surplus income.
• You can pay off a consumer proposal early, while bankruptcy has a pre-defined length determined by law.
• A consumer proposal has fewer required duties than bankruptcy, for instance, there’s no need to report your income and expenses monthly in a consumer proposal.

Is a consumer proposal right for me?

A free, no-obligation consultation with a Licensed Insolvency Trustee at Spergel will help you decide if a consumer proposal is the right debt solution for you, or if another form of debt relief is more appropriate for your circumstances.

When are my counselling sessions?

Your first stage counselling session has to be completed within 60 days of filing your proposal: the second stage within seven months of filing. Please refer to the package we gave to you upon signing for the date and timing of the meetings. If a third-party counsellor is completing your session, they will
contact you within several weeks of signing with the appointment timing.

A consumer proposal is a debt relief solution for those facing unmanageable debt, offering a structured way to reduce and repay debt without filing for bankruptcy. Consulting with a Licensed Insolvency Trustee will ensure you understand all your options and can make an informed decision about whether a consumer proposal is the right choice for you. Book a free, no-obligation consultation with an experienced Licensed Insolvency Trustee at Spergel to get started.

*Based on a real client – for privacy, some details have been altered.

From devastation to recovery: how Spergel helped the Thompson family rebuild after wildfires

Last summer, a devastating wildfire swept through British Columbia, leaving a trail of destruction in its wake. Among those affected was the Thompson family, who had lived in their home for over 15 years. The wildfire not only destroyed their house but also ravaged their small business – a local bakery that had been the family’s main source of income. The Thompsons are a hard-working family with deep roots in their community. They had put all their savings into their home and business, believing they were well-prepared for the future. However, the wildfire was an unforeseen disaster that left them with nothing but a pile of ashes. Their home was uninsured, and the bakery’s insurance covered only a fraction of the loss. Faced with mounting bills and no income, the family quickly found themselves drowning in debt.

To protect our client’s privacy, aspects of this case study have been altered.

Client Background

The Thompson family had long been a pillar of their community in British Columbia. For over 15 years, they had built a stable and fulfilling life, running a beloved local bakery and living in a home filled with cherished memories. Known for their hard work and dedication, the Thompsons were deeply invested in their community, both financially and emotionally. They had always been diligent about their finances, ensuring their home and business were well-maintained and supported. However, the unforeseen wildfire of 2023 upended their lives, leaving them with devastating losses and mounting debts that threatened their financial stability.

The Challenge

The wildfire left the Thompson family in an unimaginable situation. With their home reduced to ashes and their bakery – once the heart of their livelihood – completely destroyed, they were suddenly burdened with overwhelming financial obligations. Their insurance provided minimal relief, and the bills quickly piled up. They faced a mortgage on a home that no longer existed, business loans that they could not repay, and mounting credit card debt. The family, who had always managed their finances responsibly, now found themselves on the brink of insolvency, with no clear path forward. Overwhelmed and uncertain, they knew they needed expert help to navigate this crisis and save their future.

Solution

Recognizing the severity of the Thompson family’s situation, Spergel immediately provided a comprehensive and compassionate approach to their financial crisis. A Licensed Insolvency Trustee (LIT) was assigned to work closely with the family, thoroughly assessing their financial landscape and exploring all available options. After careful deliberation, the LIT recommended a consumer proposal as the most viable solution. This allowed the Thompsons to negotiate with their creditors, significantly reducing their debt while avoiding the long-term impact of bankruptcy. The proposal was crafted to be both fair and sustainable, giving the family a manageable repayment plan and the breathing room they needed to begin rebuilding their lives.

Implementation

Once the consumer proposal was agreed upon, Spergel swiftly moved to implement the plan with meticulous attention to detail. The Licensed Insolvency Trustee engaged in rigorous negotiations with the Thompsons’ creditors, successfully reducing their total debt from $250,000 to just $75,000 – an astonishing 70% reduction. This significant relief was life-changing for the family, allowing them to focus on rebuilding without the crushing weight of insurmountable debt. Their LIT established a manageable repayment plan, with the Thompsons agreeing to pay $500 per month over five years. Spergel also provided ongoing financial counselling and connected the family with local resources to secure temporary housing and support for relaunching their bakery. The effective implementation of the consumer proposal not only stabilized the family’s finances but also gave them a clear and attainable path to recovery.

Results

The results of Spergel’s intervention were transformative for the Thompson family. The drastic reduction in debt from $250,000 to $75,000, along with a manageable repayment plan, lifted an immense burden off their shoulders. With their finances stabilized, the Thompsons could focus on rebuilding their lives and business. Within months, they secured a new home and reopened their bakery in a different location, thanks to the community’s support and the financial breathing room provided by the consumer proposal. The family is now on track to complete their repayment plan ahead of schedule and is thriving in both their personal and professional lives. The successful outcome not only saved the Thompsons from insolvency but also restored their hope for the future.

Conclusion

The Thompson family’s journey from devastation to recovery is a powerful testament to the impact of timely, expert financial guidance. Thanks to Spergel’s personalized approach and strategic debt reduction, the Thompsons were able to overcome the severe challenges posed by the wildfire. Today, they are rebuilding their lives with confidence, free from the overwhelming burden of debt. Their story exemplifies how Spergel’s commitment to helping clients navigate financial crises can lead to renewed stability and a brighter future.

Client Testimonial

“When the wildfire destroyed our home and business, we were at a complete loss – both emotionally and financially. We had always been careful with our finances, but this disaster left us with nowhere to turn. That’s when we found Spergel. From the very first meeting, they treated us with such compassion and respect, helping us see that there was a way forward. Their team worked tirelessly to reduce our debt by 70%, giving us a manageable plan to repay what we owed. Thanks to Spergel, we didn’t just survive this crisis – we’re thriving again. We’ve rebuilt our bakery, found a new home, and, most importantly, regained our hope for the future. We couldn’t have done it without them.”

— Mr. Thompson, British Columbia

Are you also struggling in the Tompson’s situation?

If this feels close to home, there are lots of ways we can help:

• Debt Consolidation and Management
• Budgeting
• Credit Counselling
• Debt Help

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• Jenna’s Story : A Victory Over Gambling-Induced Insolvency
• Larissa’s Story: Finding Financial Stability After Divorce
• Richard’s Story: A Veteran’s Path to Financial Stability
• Alex’s Story: From Cryptocurrency Debt to Financial Triumph
• Jennifer’s Story: Breaking Free – Escaping The Debt Trap With Spergel
• Jordan’s Story: From Tax Debt to Financial Stability with Spergel
• Sarah’s Story: From Budgeting Pro to Financial Freedom – A Tale of Tracking Spending and Creating Big Savings
• David’s Story: From Overwhelming Debt to Financial Freedom – A Bankruptcy Success Story
• Chelsey’s Story: From Financial Crisis to Renewed Hope – Overcoming a Husband’s Financial Infidelity
• Mrs. S’s Story: Empathetic Resolution for a Vulnerable Client – Tackling A High Interest Loan
• John’s Story: Turning Fraud-Fuelled Financial Struggles into Success
• Mia’s Story: Transforming FOMO into Financial Freedom – A Budget-Friendly Social Solution
• The Link Between Debt Load and Mental Health – Real Success Stories from Canadians

What is a consumer proposal?

Before exploring the duration of a consumer proposal, let’s understand how a consumer proposal may be able to help you. A consumer proposal is a legal form of debt settlement, that is a formal agreement made between an individual and their creditors, facilitated by a Licensed Insolvency Trustee.  Filing a consumer proposal is the process of suggesting a manageable monthly repayment figure to your creditors, and can reduce your debt by up to 80%. Consumer proposals have a number of advantages, including the ability to keep your assets and avoid filing bankruptcy. You work with a Licensed Insolvency Trustee to determine a reasonable amount to propose, and they will negotiate with your creditors on your behalf. When filed, consumer proposals trigger a stay of proceedings, which means you are automatically protected from your creditors who are no longer able to contact you or pursue any legal action. At Spergel, we have helped over 100,000 Canadians become debt free. Unlike other firms, you will be assigned your very own trustee to walk you through the end to end debt relief process.

How does a consumer proposal work?

When filing a consumer proposal, you will help to determine the amount you will repay your creditors each month over a period of up to five years. The consumer proposal will indicate the terms you need to make, including the amount to pay, how often it must be paid, and any other conditions. All of your interest-free payments will be made to your Licensed Insolvency Trustee, who will then pass this on to your creditors. Your payments will be affected by the amount of debt that you owe, your income, any assets you may own, and the period of time over which you can manageably make your payments. Consumer proposals must be completed within five years, and usually take between one and five years to complete. It is possible to complete your consumer proposal quicker than the original agreement if you have an increase in income or a change in circumstances and wish to pay it off sooner.

How long does a consumer proposal last?

In short, a consumer proposal could last from a minimum of sixty days to a maximum of five years. The duration is dependent on a few factors, including your payment structure across this period of time:

• The amount of debt you have: what you’re including in your consumer proposal can impact how long a consumer proposal takes. Larger debts might need a longer repayment period to ensure your monthly payments remain manageable.
• Your income and expenses: a realistic repayment plan will be based on your ability to make manageable monthly payments while covering your essential living expenses. 
• The acceptance of your creditors: how willing creditors are to accept your proposed repayment terms can affect the length of a consumer proposal. While most creditors will likely be open to negotiation, some might request changes, which can in turn extend the repayment timeline. 

Each of these steps will determine the overall time your consumer proposal might last. Most consumer proposals will last between three to five years in Canada. Once all your consumer proposal payments have been made and the terms met, you will then be discharged from your consumer proposal and free from your unsecured debts once and for all. Consumer proposals are then removed from your credit report earlier than bankruptcy, roughly three years after completion. At Spergel, our Licensed Insolvency Trustees will support you with life after a consumer proposal, and help you to rebuild your credit score. 

Should I file a consumer proposal?

If you’re looking to reduce your unsecured debts significantly, but would like to retain your assets (i.e. home and vehicle) and income, a consumer proposal is the best form of debt relief for you to file. A reputable Licensed Insolvency Trustee is best placed to advise you on your actions, be it a consumer proposal or another form of debt relief. Consumer proposals have the following advantages:

• You only pay what you can afford, not the amount being demanded by your creditors
• A stay of proceedings is generated when you file, offering full protection from creditors including collection calls, wage garnishment, and bank account freezes
• No more interest charges
• Simple monthly repayments
• You can keep your assets
• You do not have to pay for a Licensed Insolvency Trustee; instead, Licensed Insolvency Trustee fees are factored into what your creditors receive

How long does a consumer proposal last? FAQs

Here are some of the most common questions we receive about the duration of a consumer proposal: 

What is the downside of a consumer proposal?

While a consumer proposal offers significant debt relief and a structured path to financial recovery, it’s important to consider its potential downsides too. One downside is that a consumer proposal will have a negative impact on your credit score. Similar to bankruptcy, a consumer proposal is a formal debt solution that will be recorded on your credit report for a specified period, typically lasting several years after completion. During this time, securing new credit or loans may be more challenging, and you may face higher interest rates. Additionally, while a consumer proposal offers a bankruptcy alternative, it still involves making regular payments towards your debts, which can impact your budget and financial flexibility. It’s essential to weigh the benefits and drawbacks carefully and consult with your Licensed Insolvency Trustee to explore all available options and make an informed decision based on your individual financial circumstances.

How long does a consumer proposal stay on record?

A consumer proposal remains on your credit report for a specified period, typically lasting for three years after the completion of the proposal. During this time, your consumer proposal will be visible to lenders and may impact your ability to secure new credit or loans. While having a consumer proposal on your credit report can make borrowing more challenging, it’s important to note that its impact diminishes over time. After the three-year period, the consumer proposal will be removed from your credit report, allowing you to rebuild your credit history and regain financial stability. It’s essential to practise responsible financial habits during and after the consumer proposal to demonstrate creditworthiness to lenders and improve your credit score over time.

How long is the average consumer proposal?

The duration of an average consumer proposal typically ranges from three to five years. The specific length of a consumer proposal, however, varies depending on individual circumstances, such as the amount of debt, income, expenses, and creditor acceptance of the proposed repayment terms. Your Licensed Insolvency Trustee will work closely with you to negotiate a repayment plan that is manageable and realistic based on your financial situation. While a consumer proposal may last several years, it offers a structured and manageable path to debt relief, allowing you to regain control of your finances and work towards a fresh financial start.

What happens when a consumer proposal is finished?

When a consumer proposal is finished, the individual is granted a discharge, marking the successful completion of the debt repayment plan. This discharge formally releases the individual from the debts included in the consumer proposal, providing them with a fresh financial start. The consumer proposal is removed from the individual’s credit report three years after its completion, allowing them to rebuild their credit history. With the burden of debt lifted, individuals can focus on managing their finances responsibly and working towards their financial goals. It’s important to continue practising healthy financial habits and budgeting effectively to maintain financial stability in the future.

What is the success rate of a consumer proposal?

The success rate of a consumer proposal is generally high, with many individuals achieving significant debt relief and successfully completing their repayment plan. At Spergel, the ‘get rid of debt’ people, we have a 99% success rate on any consumer proposals that we file. Consumer proposals are widely regarded as an effective debt resolution option for those facing financial challenges. The success of a consumer proposal depends on various factors, including the individual’s commitment to making regular payments, the negotiated terms of the proposal, and the support and guidance provided by their Licensed Insolvency Trustee. By working closely with a trusted professional and adhering to the terms of the consumer proposal, individuals can often achieve their goal of becoming debt-free and regaining control of their finances.

While a consumer proposal can last a while, for many Canadians it is the method of debt relief that makes the most sense. At Spergel, our experienced Licensed Insolvency Trustees have helped over 100,000 individuals gain debt relief, and we are here to help you too. Book a free consultation today – you owe it to yourself.

What to read next

• What can I keep in a consumer proposal?
• How much does a consumer proposal cost?
• Consumer proposal FAQs
• Cost difference between bankruptcy and consumer proposal
• How long after a consumer proposal can I get a mortgage?

*Based on a real client – for privacy, some details have been altered.

Meet Richard

Richard has dedicated his life to serving in the Department of National Defense since 1997. Despite his commitment to protecting his country, Richard encountered significant personal challenges that disrupted his financial stability. He filed for bankruptcy a number of years ago, and has since faced multiple financial adversities. The breakdown of an unhealthy relationship and personal health issues led to over-extended credit and mounting debt. With retirement on the horizon and a reduction in income looming, Richard knew he needed a sustainable solution to manage his financial situation. Seeking help online, he discovered Spergel, where he found the guidance and support needed to gain financial freedom once and for all.

The Challenge

Richard faced a daunting financial challenge as he neared retirement. The breakdown of an unhealthy relationship and significant personal health issues linked to his role as a soldier had led him to over-extend his credit, resulting in mounting debt that he struggled to manage. As a dedicated soldier with over two decades of service in the military, Richard had always prioritized his duty and responsibilities, but these personal setbacks made it increasingly difficult to keep up with his financial obligations. With retirement on the horizon, Richard’s income was set to decrease significantly, exacerbating his financial struggles. His situation was further complicated by a bankruptcy filed in 2008, from which he had been discharged but which still lingered in his financial history. The prospect of reduced income and the weight of debt left Richard feeling overwhelmed and uncertain about his financial future. He knew he needed a sustainable solution to address his debts, maintain financial stability, and secure a comfortable retirement. Desperate for relief and guidance, Richard turned to Spergel, seeking a way to regain control of his finances and navigate the challenges ahead.

Solution

Recognizing the urgency and complexity of Richard’s financial situation, Spergel stepped in to provide the necessary guidance and support. Richard was promptly connected with an expert Licensed Insolvency Trustee – unlike other bankruptcy firms, at Spergel, you are partnered with a Licensed Insolvency Trustee for your entire debt relief process, instead of being passed from person to person. After a thorough assessment of Richard’s financial circumstances, his Licensed Insolvency Trustee recommended filing a consumer proposal. This legal process allowed them both to negotiate with his creditors to repay a portion of his debt over an extended period, avoiding another bankruptcy and enabling him to retain control of his assets. The consumer proposal provided Richard with a manageable repayment plan tailored to his upcoming reduced income post-retirement.

Implementation

Throughout the debt relief process, the Spergel team offered unwavering support, guiding Richard through each step and addressing his concerns with patience and expertise. The consumer proposal process began with a comprehensive consultation and assessment, before Richard’s Licensed Insolvency Trustee prepared a tailored repayment plan that accounted for his reduced post-retirement income. The proposal was then submitted to and negotiated with Richard’s creditors on his behalf, ultimately securing their agreement to the terms. Richard was granted immediate relief from creditor actions, and received financial counselling sessions to enhance his financial management skills. Richard’s Licensed Insolvency Trustee maintained regular contact, monitoring his progress and making any necessary adjustments to ensure the consumer proposal’s success. This structured approach resolved Richard’s debt concerns and set the foundation for a secure financial future as he transitioned into retirement.

Results

The successful implementation of the consumer proposal brought significant relief and positive outcomes for Richard. He experienced immediate respite from creditor harassment and the stress of mounting debts. The proposal reduced Richard’s total debt from $75,000 to $30,000, allowing him to repay this amount over a five-year period with manageable monthly payments.

With this repayment plan in place, Richard was able to meet his financial commitments without overwhelming strain, even as his income reduced post-retirement. The financial counselling sessions provided by Spergel empowered Richard with better financial management skills, helping him to avoid future debt issues. Overall, Richard regained control of his finances, allowing him to approach his retirement with confidence and peace of mind. The process not only resolved his current financial challenges but also equipped him with the tools and knowledge for sustained financial health.

Conclusion

Richard’s success story with Spergel showcases the profound impact of effective debt relief solutions. Through the implementation of a consumer proposal, Richard reduced his debt from $75,000 to $30,000, gaining immediate relief from creditor pressures and regaining control of his finances. With the support of his Licensed Insolvency Trustee, Richard approached his retirement with confidence, equipped with valuable financial management skills for sustained financial health in the future.

Client Testimonial

“From the moment I reached out to Spergel, I felt a weight lifted off my shoulders. The team’s professionalism and compassion put me at ease, and their guidance through the consumer proposal process was invaluable. Thanks to their expertise, I’ve not only reduced my debt significantly but also gained the financial confidence I need as I approach retirement. I can’t thank Spergel enough for their support and dedication to my financial wellbeing.”

– Richard, Saskatchewan

Are you also struggling in Richard’s situation?

If this feels close to home, there are lots of ways we can help:

• Debt Consolidation and Management
• Budgeting
• Credit Counselling
• Debt Help

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What is a consumer proposal?

A consumer proposal is a formal, legally binding agreement between you and your creditors that allows you to settle your debts for less than the total amount owed. In fact, it can reduce your overall debt by up to 80%. Consumer proposals provide a structured plan for debt repayment, typically extending over a maximum period of five years. One of the key advantages of a consumer proposal is that it allows you to retain possession of certain assets while finding a manageable path to financial recovery. This makes it a unique and potentially favourable option compared to both bankruptcy and any informal debt solutions you may be considered. Other advantages of a consumer proposal include enabling you to begin a fresh financial future, and preventing your creditors from contacting you. It can also put an immediate end to any actions including collection calls, wage garnishments, and bank account freezes. At Spergel, we have a 99% acceptance rate on any consumer proposals we file, and we have been helping Canadians to gain debt relief for over 34 years. Learn more about what a consumer proposal entails.

What can I keep in a consumer proposal?

The concept of bankruptcy is using your property and assets to repay what you can towards the debts that you owe to your creditors. Consumer proposals, in contrast, allow you to keep your property and assets, and to repay your creditors using cash you earn over a longer time period instead. Many Canadians prefer to file a consumer proposal (Canada’s #1 bankruptcy alternative) because it is considered to be more flexible and often less disruptive. Most importantly, it allows you to keep assets you may have otherwise had to surrender. Here is what you can keep in a consumer proposal.

Your home

In most circumstances, you can keep your primary home when entering a consumer proposal. It is essential, however, to ensure that your mortgage payments are up-to-date and that the equity in your home is within the permitted limits set by provincial regulations. If keeping your home is a priority, a consumer proposal is probably the best choice for you. As long as you keep your mortgage payments up-to-date, your property will remain yours.

Your vehicle

Provided you can keep up with any car payments alongside your consumer proposal payments, you can keep ownership of your vehicle, as long as the equity in it falls within the limits specified by your province. This is because the practical need for transportation in daily life is recognized.

RRSPs and pensions

Registered Retirement Savings Plans (RRSPs) and pensions are generally exempt from the consumer proposal process. These assets are crucial for long-term financial security, and their protection is prioritized. While creditors can claim on any contributions made in the last year in a bankruptcy, consumer proposals protect the entire value of your RRSPs. This said, you might want to withdraw any funds from any institutions where you owe debts, as lenders may decide to withdraw money from your accounts to offset any outstanding balances. They are permitted to do so until you file a consumer proposal or bankruptcy.

Household goods and furniture

Essential household items and furniture are typically considered exempt. This includes items needed for daily living, such as appliances, furniture, and personal belongings. You will need to disclose your income, assets, and possessions to your Licensed Insolvency Trustee, just so that they can prepare a fair settlement.

Trade tools

If your livelihood depends on specific tools or equipment, these are protected in a consumer proposal. This ensures that you can continue to earn an income and support your family.

Tax returns, GST rebates, and other government benefits

You need to continue filing your annual income tax returns while you repay your consumer proposal. What happens to any applicable refunds depends on whether or not you owe funds to the Canada Revenue Agency (CRA). The same applies to GST rebates and other government benefits.

What to consider before filing a consumer proposal

Although a consumer proposal provides a degree of protection for certain assets, it is crucial to consider the specifics of your financial situation and provincial regulations. Equity limits, payment plans, and individual circumstances can vary, making it essential to consult with a reputable Licensed Insolvency Trustee to navigate the process effectively. Although you may have the option to keep many of your assets, it is also helpful to consider the benefits of letting go of certain items. Make a list of everything you own and note what you must keep, want to keep, and what you might be willing to let go. It is a good idea to bring this to your free initial consultation with a Licensed Insolvency Trustee for an informed and unbiased opinion on what to do.

How do other debt relief solutions handle assets?

There are a number of debt relief solutions to handle your debt. The primary two are a consumer proposal and bankruptcy (governed by the Bankruptcy and Insolvency Act), although there are some other informal options that you can access with or without the support of a non-profit credit counsellor. Deciding which debt relief option is best for you will depend on the amount of debt you owe, which assets you wish to keep, and how quickly you want to be debt-free. We recommend speaking to an experienced Licensed Insolvency Trustee to help you make the decision. Here is how a consumer proposal compares to other debt relief solutions when it comes to assets and what you are able to keep.

What can I keep in a consumer proposal? FAQs

Here are some of the most commonly asked questions we are asked about ‘what can I keep in a consumer proposal?’

What debt is not included in a consumer proposal?

While a consumer proposal is a powerful debt relief option, not all types of debts are included in the proposal process. Here are those typically not covered by a consumer proposal:

1. Secured debts – consumer proposals primarily deal with unsecured debts. Secured debts, such as mortgages or car loans, are tied to specific assets.
2. Child and spousal support payments – debts related to court-ordered child support or spousal support payments are not dischargeable through a consumer proposal. Individuals are legally obligated to fulfil these financial responsibilities, and they are not affected by the proposal process.
3. Court fines and restitution orders – legal obligations like court fines, penalties, and restitution orders resulting from criminal offences or civil judgments are not covered by a consumer proposal. These debts must be settled separately and according to the terms set by the court.
4. Student loans (in certain circumstances) – student loan debts are generally not discharged through a consumer proposal unless you have been out of school for at least seven years. In specific situations, where repaying the student loan would cause undue hardship, a court may consider including it in the proposal.
5. Debts arising from fraud or misrepresentation – debts resulting from fraudulent activities or misrepresentation – such as obtaining credit through false information – are typically not dischargeable through a consumer proposal.
6. Debts arising after the proposal date – any debts incurred after the date of the consumer proposal are not covered by the proposal. It only addresses pre-existing debts at the time of its initiation.
7. Non-allowable debts – certain debts specified as ‘non-allowable’ by the Bankruptcy and Insolvency Act cannot be included in a consumer proposal. These may include fines or penalties imposed for environmental violations, damages resulting from fraudulent activities, or debts arising from intentional injuries to others.

It is crucial to consult with a Licensed Insolvency Trustee to get personalized advice based on your specific financial situation. While a consumer proposal provides significant relief for many types of debts, understanding its limitations can help you to make informed decisions regarding your financial future.

Can I keep any credit cards in a consumer proposal?

During a consumer proposal, it is typically a requirement to surrender all credit cards associated with the debts included in the proposal. This measure aims to foster responsible financial habits by preventing the accrual of new debt while individuals work towards repaying their existing obligations. The surrender of credit cards is part of the commitment to sound financial management during the proposal period. While you are generally not allowed to keep traditional credit cards, you might want to explore the option of a secured credit card, which is backed by a cash deposit. Successfully completing the consumer proposal provides an opportunity for rebuilding credit over time through responsible financial practices and timely debt repayment. Learn more about keeping a credit card with a consumer proposal.

What is the downside of a consumer proposal?

While a consumer proposal is a valuable debt relief option for many individuals, it is important to be aware of potential downsides associated with this financial strategy. Here are some considerations:

1. Impact on credit score.
2. Limited borrowing capacity.
3. Impact on future loan approval.
4. Costs and fees.
5. Employment and industry considerations.

It is crucial to thoroughly assess your individual financial situation, weigh the benefits against the downsides, and consider alternatives before deciding to proceed with a consumer proposal. Consulting with a Licensed Insolvency Trustee provides personalized advice and ensures you have a clear understanding of the implications for your specific circumstances. Learn more about the disadvantages of a consumer proposal, and your alternative options.

Do I have to include all debt in a consumer proposal?

When filing a consumer proposal, you have the flexibility to choose which unsecured debts to include in the agreement. This voluntary process allows you to address specific financial challenges by focusing on the debts causing the most strain while excluding others. It is important to note that secured debts, tied to collateral like mortgages or car loans, are not typically part of the consumer proposal. Additionally, ongoing financial obligations such as child support, spousal support, and certain fines are not included. The decision to include or exclude specific debts should be made after careful consideration of your financial situation, and consulting with a Licensed Insolvency Trustee is recommended for personalized advice and guidance throughout the proposal process.

A consumer proposal is a powerful tool for regaining control over your finances, and the ability to retain certain assets makes it a more attractive option for many individuals facing financial challenges. If you are considering a consumer proposal, book a free consultation with a Licensed Insolvency Trustee at Spergel (the ‘get rid of debt’ people) to explore your options and develop a tailored plan for your financial wellbeing.

What to read next

• How long after a consumer proposal can I get a mortgage?
• How much does a consumer proposal cost?
• Why does the court have to approve a consumer proposal?
• Consumer proposal FAQs
• Cost difference between bankruptcy and consumer proposal

What impact does a consumer proposal have on your credit rating?

When it comes to taking out a mortgage, all lenders will review your credit score while assessing your application. If you have taken out a consumer proposal, this can affect your ability to have a successful mortgage application. Put simply, if you have or recently completed a consumer proposal, you will be considered a credit risk. Even if you have completed your consumer proposal, you still have a history of being unable to make debt repayments. Because of this, generally speaking, conventional lenders in Canada will be unlikely to approve a mortgage application unless you have at least two years‘ clean credit history following completion of your consumer proposal. If you do have two years’ clean history, you will still need a healthy downpayment of 20%, and evidence that you have been working to rebuild your credit score. You may, however, be able to secure a mortgage from a specialist lender earlier than this. They will assess your situation and the potential risk involved. A reputable Licensed Insolvency Trustee will advise you on the best course of action for your unique situation.

How long after a consumer proposal can I get a mortgage?

If you go through a conventional mortgage lender, this will likely take at least two years, or less if you find a suitable alternative lender. For this reason, it really is dependent on your lender, although most will want you to turn around your credit score before lending to you. If you are able to get a mortgage or even have the financing for a mortgage renewal approved, you can do so even before your consumer proposal is completed. The only condition is that you will need to use your proceeds to pay off your consumer proposal. The good news is that you can therefore apply for a mortgage whenever you like, even if you are in the midst of your consumer proposal. Just bear in mind that you may need to show evidence of your attempts to rebuild your credit score. Your mortgage rate while in a consumer proposal will also likely be higher than a conventional mortgage. The interest rate could, however, be negotiated when it comes to a mortgage renewal.

How can you speed up getting a mortgage after a consumer proposal?

There are a few actions you can take to increase your chances of getting a mortgage during a consumer proposal before you go on to enjoy life after a consumer proposal. These include the following:

• Completing your consumer proposal by paying it off in its entirety
• Saving up a 20% downpayment for a property
• Working with a private lender over a conventional lender
• Working to rebuild your credit score by taking (and repaying) credit and cleaning up any reporting errors

Can you refinance your mortgage to pay off your consumer proposal?

You absolutely can, and often it is the fastest way to pay off a large debt like a consumer proposal. You may wish to take on a larger mortgage to cover both your property amount and the consumer proposal, provided there is sufficient equity in your property to cover the additional loan needed. If you renew your mortgage early, you do need to be conscious of potential prepayment penalties, which may not be helpful alongside your consumer proposal. Lenders will also want to understand why you filed a consumer proposal in the first place to assess the risk of allowing you to refinance. They will also review your credit score to see what you are doing to rebuild it and also to ensure you do not risk falling into further debt. If approved, there are lots of benefits of refinancing your mortgage to pay off your consumer proposal. You can rebuild your credit more quickly, your monthly payments will likely be reduced, and you can apply for credit again – including credit cards – if needed.

How do you refinance to pay off your consumer proposal?

If you decide refinancing is the right move to pay off your consumer proposal sooner, there are a number of steps to take. First of all, your mortgage broker will see if this is a possibility for you. There are a number of variables involved, including your property, any potential equity, and why you needed to file a consumer proposal in the first place. They will also consider your current mortgage, and how close it is to maturity. If refinancing is feasible for you, your broker will share your application with private lenders who may be interested. You will then receive quotes, and you can make a decision. Often, it is quite quick and can be wrapped up in around a month or two. Your Licensed Insolvency Trustee will be able to advise you throughout the process also.

What are the benefits of paying off your consumer proposal early?

There are various advantages of paying off a consumer proposal ahead of time. We have listed the top benefits below:

• You can gain a mortgage more easily
• You can renew your mortgage more easily
• You can work on rebuilding your credit score
• You can gain credit much more easily
• You will have an improved cash flow
• You will gain financial freedom

If you still have questions on ‘how long after a consumer proposal can I get a mortgage?’, you should book a free consultation with a Licensed Insolvency Trustee. At Spergel, we have been helping Canadians file consumer proposals for years, and we are here to help you too. The sooner you reach out, the sooner we can get you back on the path to financial freedom.