Is a consumer proposal is the right option for you?

Are you a Canadian in debt? Find out who can make a consumer proposal, and whether you may be eligible to pay off a portion of your debt.

Is a consumer proposal is the right option for you?

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Do you live in Canada, with debt under $250,000 (not including debts like a mortgage secured by your principal residence)? If so, a consumer proposal might be the right choice for you.

What is a consumer proposal?

A consumer proposal is an alternative to declaring personal bankruptcy.

  • It’s a formal, legally binding process administered by a consumer proposal administrator who is also a bankruptcy trustee.
  • They negotiate with your creditors on your behalf to find an arrangement for a partial repayment of your total unsecured debt owing, and gives you immediate protection from debt collectors.

In a nutshell, when you file a consumer proposal, you agree to pay a portion of what you owe, and your creditors agree to forgive the rest.

How it works

The trustee will work with you to develop a “proposal” — an offer to pay your creditors a percentage of what is owed to them, or extend the time you have to pay off the debts, or both.

  • The term of a consumer proposal extends to a maximum of five years. Payments are made through the trustee, and the trustee uses that money to pay each of your creditors.

Is it the right option for you?

Want to know whether a consumer proposal is the right option for you?

  • The best way to find out is to arrange a meeting with a trustee to discuss your personal situation.
  • They can evaluate your finances, explain the benefits and drawbacks and various options you can pursue.

The process

According to the Office of the Superintendent of Bankruptcy Canada, there are three main steps in the process.

  1. The trustee will file the proposal with the Office of the Superintendent of Bankruptcy (OSB). Once your proposal is filed, you stop making payments directly to your unsecured creditors. In addition, if your creditors are collecting your salary (garnishing your wages) or have filed lawsuits against you, these actions are stopped.
  2. The trustee will submit the proposal to your creditors. The proposal will include a report on your personal situation and the causes of your financial difficulties.
  3. Creditors then have 45 days to either accept or reject the proposal. They can also do this either prior to or at the meeting of creditors, if one is held.
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