Are you struggling to keep up with your unsecured debts? Before filing for bankruptcy, you might consider a consumer proposal. This is a lesser-known way to get your debts under control. Let’s take a look at what it is, how it works, how it affects your credit rating and for how long.

What is a consumer proposal and how does it work?

A consumer proposal is a debt settlement arrangement filed through a Licensed Insolvency Trustee whereby you agree to pay back less debt than you owe. You can save a lot of money by filing a consumer proposal. It’s not unheard of for you to lower your debts by between 70 and 80 percent. Best of all, for making your agreed-upon payments in the consumer proposal, you’ll get to keep your assets and it will get rid of your debt.

Understand your options  

The debt amount you need to file a consumer proposal may vary by which province or territory you reside in. In most cases, you must have at least $1,000. By law, you cannot owe more than $250,000, not including your mortgage to use this solution.[1] If you want to file jointly with your spouse, the maximum debt amount increases to $500,000.

A consumer proposal is legally binding, which means that once it’s filed and accepted, it will freeze the interest on your debts, not to mention stop the collection calls and wage garnishment.

See how a proposal works step-by-step »

I don’t have to pay back the entire debt?

No, not necessarily. A Licensed Insolvency Trustee will work with you to come up with a proposal for your creditors. In that proposal will be an offer to pay your creditors a portion of what they’re owed, extend the time period to repay your debts or both. Note that a consumer proposal cannot go beyond five years.

A Licensed Insolvency Trustee can help you decide the best way to structure your consumer proposal to improve your chances of it being accepted by your creditors.

How will this affect my credit rating and for how long?

Most people consider filing a consumer proposal as a last resort for a good reason. If you file a consumer proposal, you’re assigned the lowest possible credit score. This makes it difficult and costly to obtain credit in the coming years.

Generally speaking, a consumer proposal will stay on your credit report for three years after its completion. So, if you’re able to pay off your consumer proposal in five years, it will affect your credit score for eight years.

Understand the impact on your credit »

What are some of my other debt solution options?

As mentioned, there are several debt solutions to consider. A consumer proposal makes the most sense when debt consolidation, debt settlement and debt management won’t work.

An alternative to filing a consumer proposal is bankruptcy. However, before filing for bankruptcy, it’s important to understand the key differences between bankruptcy and a consumer proposal.

If you’d like to hold onto your assets and you work in an industry where you’re required to let others know if you’ve gone bankrupt, you might consider filing for a consumer proposal instead.

Consumer Insolvency & Consumer Proposal Statistics in Canada

2019 2018 % Change
Insolvency 137,178 125,266 9.5%
Consumer Proposal 82,769 70,175 17.9%
Insolvency 11,086 9,630 15.1%
Consumer Proposal 5,589 4,925 13.5%
British Columbia
Insolvency 11,221 10,172 10.3%
Consumer Proposal 7,087 6,100 16.2%
Insolvency 3,146 2,824 11.4%
Consumer Proposal 1,802 1,460 23.4%
Newfoundland & Labrador
Insolvency 3,221 2,802 15.0%
Consumer Proposal 1,755 1,426 23.1%
New Brunswick
Insolvency 4,851 4,480 8.3%
Consumer Proposal 2,508 2,218 13.1%
Nova Scotia
Insolvency 6,040 5,595 8.0%
Consumer Proposal 2,847 2,112 34.8%
Northwest Territories
Insolvency 66 78 -15.4%
Consumer Proposal 57 36 58.3%
Insolvency 6 3 100%
Consumer Proposal 6 3 100%
Insolvency 44,852 38,856 15.4%
Consumer Proposal 30,275 24,196 25.1%
Insolvency 42,865 41,736 2.7%
Consumer Proposal 22,827 20,548 11.1%
Prince Edward Island
Insolvency 749 731 2.5%
Consumer Proposal 363 305 19.0%
Insolvency 3,453 3,399 1.6%
Consumer Proposal 2,136 2,119 0.8%
Insolvency 33 35 -5.7%
Consumer Proposal 20 22 -9.1%


How can a Consumer Proposal Administrator help with a Consumer Proposal?

By filing your consumer proposal with a Licensed Insolvency Trustee and Consumer Proposal Administrator, you’ll get immediate protection from your creditors. The collection calls will stop, and you won’t have to worry anymore about wage garnishment.

Are you interested in filing a consumer proposal, but you’re not sure if you’re the right fit? Contact us today. An expert from our team will get in touch with you and discuss your situation to see if filing a consumer proposal makes the most sense for you.