Consumer Proposal Resource Centre

You are probably here because the minimum payments stopped working.

The balances have climbed for months, a collection agency has started calling, and you found the phrase “consumer proposal” without knowing whether it is a real legal remedy or a debt-relief company’s sales pitch. This page is the plain answer, written by a Licensed Insolvency Trustee with a legal and finance background. It explains what a consumer proposal is, who it is for, what it does and does not do, and how it works, so you understand it before you bring it to a conversation.

One fact belongs at the front, because it changes how the rest reads. A consumer proposal is not a last-ditch move, and it is not bankruptcy. Of the two formal paths Canadians use to resolve overwhelming personal debt, it is now the one most people choose. In 2025, Canadians filed 140,457 consumer insolvencies, and 110,168 of them (78.4 per cent, nearly four in five) were consumer proposals rather than bankruptcies (Office of the Superintendent of Bankruptcy, Insolvency Statistics in Canada, Fourth Quarter of 2025, 12-month tables, accessed 2026-07-15); proposals have been the majority every year since 2017. The process described below is the ordinary path, not a mark of failure.

A consumer proposal is a formal, legally binding agreement between you and the people you owe. It is made under one part of a federal law, the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”), specifically Division II of Part III, sections 66.11 to 66.4. You offer your unsecured creditors a set amount, paid over a set period, in full settlement of what you owe. Usually you pay back less than the full balance, spread over several years of fixed monthly payments. If enough creditors accept, the offer binds all of them, including any who voted against it or did not vote. When you finish the payments and the two required counselling sessions, the covered debts are legally gone.

Three features do the real work.

First, it is a court-supervised process under a federal law, not a private negotiation and not a product sold by a company. In practice a Licensed Insolvency Trustee runs it, licensed and regulated by the federal Office of the Superintendent of Bankruptcy. The Act calls the person who runs a proposal the administrator (BIA s.66.11), and in the ordinary course that administrator is a Licensed Insolvency Trustee, so the two words describe one role. The Act does let the Superintendent designate someone else, but that is not how these files are run in practice; the analysis behind this page sets the point out precisely.

Second, the moment your proposal is filed, the law stops your unsecured creditors from enforcing what you owe. This is a stay of proceedings (BIA s.69.2). Wage garnishments for unsecured debts stop, lawsuits over unsecured debts cannot start or continue, and creditors must deal with your Trustee instead of contacting you. One kind of garnishment is not caught by the stay, support owed to a spouse or child, and that carve-out is set out below. That protection is what most people come here for, and it begins on filing, not on a later approval date.

Third, it binds the whole group. You cannot include one credit card and leave another out, and once the required majority accepts, a creditor who wanted more is bound by the group’s decision (BIA s.66.28). That is the difference between a formal proposal and an informal “I will pay you sixty cents on the dollar” letter, which any single creditor can refuse.

A consumer proposal is for a person, not a company, who cannot keep up with unsecured debt but can still make a modest, steady payment.

The Act calls this being an insolvent person (BIA s.2): you cannot meet your debts as they come due, or you have stopped paying, or your debts are more than everything you own is worth. If you can comfortably pay everything you owe on the original terms, you are not insolvent, and a proposal is not the right tool.

It fits best when you have a steady income, you want to keep assets a bankruptcy might put at risk (a house with equity, a paid-off vehicle, savings), and you can afford a fixed monthly amount for up to five years but not the full balance plus interest. It is a poor fit if you have no income and no assets to protect, because a bankruptcy may then clear the debt faster and cost you less. Whether that is true for you belongs in a conversation with a Trustee. The line-by-line comparison lives on its own page.

It is also not for secured debt. A consumer proposal deals with unsecured debts, the ones with no asset pledged against them. On its own it does not change your mortgage or car loan, which are secured against your home and car and continue on their own terms. More on that below.

There are three gates. You must pass all three.

The first gate is insolvency. You must be an insolvent person under BIA s.2. This is rarely the sticking point for someone who has read this far.

The second gate is the debt ceiling. Your total debts, not counting any debt secured by your principal residence, must be no more than $250,000 (BIA s.66.11; the ceiling has stood at $250,000 since 2009-09-18). The mortgage on the home you live in does not count. So a person who owes $180,000 on a home mortgage and $60,000 in credit cards and loans is under the ceiling, because only the $60,000 counts. A person whose unsecured debts alone exceed $250,000 is over it.

One caution from practice on that carve-out: it turns on the home being your principal residence. If you have moved out of the home, whether it still qualifies becomes a question of interpretation rather than arithmetic. My own reading, and I should be clear that this is my reading and not a rule any court has settled, looks to the Income Tax Act’s principal-residence concept. The point is well beyond this page’s scope, but if you have moved out of a home you still own, raise it in the first consultation, because it can change which door you file through.

Being over the ceiling does not mean you are out of options, so measure it carefully first. Because the limit leaves out any debt secured by your principal residence, a person with a large home mortgage and smaller unsecured debts can still be under it. If your debts genuinely exceed $250,000, you use a closely related tool, a Division I proposal (BIA Part III, Division I, beginning at s.50). It has no debt ceiling, but its court approval is mandatory and it carries a risk a consumer proposal does not: if creditors or the court refuse it, the Act deems you bankrupt automatically (BIA ss.57(a), 61(2)(a)). A refused consumer proposal has no such consequence. That path has its own explainer.

The third gate is that you must be an individual. A corporation cannot make a consumer proposal. A sole proprietorship is legally you, so its debts are your debts and can go into your proposal; a business you have incorporated is a separate legal person and cannot. The self-employed situation has its own page.

One point on province. The proposal is a federal process and works the same across Canada. What varies by province is the list of assets you could protect if you ever went bankrupt, the exemptions, and those figures feed into what your proposal needs to offer. So this page can describe the mechanism nationally, but a real number always turns on where you live. If you are in Ontario, the process below is your process, and your Trustee applies Ontario’s exemption figures to your file. The court and the terminology also change by province: in Quebec a consumer proposal is a proposition de consommateur, administered by a syndic autorisé en insolvabilité, and Revenu Québec stands beside the Canada Revenue Agency as a tax creditor. Where this page names a dollar figure set federally by the Act, it says so; anything provincial is flagged as provincial.

Most of the debts that bring people here are included.

A consumer proposal covers your unsecured debts: credit cards, lines of credit, personal and payday loans, overdrafts, unpaid utility and phone bills, collection accounts, and most debts to the Canada Revenue Agency, including ordinary income tax and sales-tax balances. Most tax debt is ordinary unsecured debt and goes into the proposal like any other, and the Agency votes on your proposal as a creditor like any other. One exception is worth naming: where the Agency’s claim is secured against your property, for example a registered lien or amounts held in a deemed trust such as unremitted payroll source deductions or sales tax, that part can rank as secured rather than unsecured and does not simply fold into the proposal. Your Trustee checks for this at the assessment. Where tax debt is the bulk of what you owe, the Agency’s vote effectively decides the outcome; its collection behaviour and its position on proposals have their own detail in the CRA garnishment article (an article today; if it becomes a full guide, this reference will follow it).

Some debts are not erased by a proposal, no matter how faithfully you complete it. Your proposal binds your creditors (BIA s.66.28(2)), and the completion certificate releases you from the debts it dealt with (BIA s.66.38). But the Act lists certain debts at s.178(1) that a proposal does not release unless the proposal expressly said it was compromising that debt and that creditor voted to accept it (BIA s.66.28(2.1)). Otherwise they survive.

The debts that ordinarily survive include: support payments for a spouse or child; debts from fraud, embezzlement, or misappropriation; court fines and penalties; and debt from a personal injury you caused, for example by drunk driving.

Student-loan debt survives too, unless you have been out of full-time or part-time study for at least seven years (BIA s.178(1)(g)). The seven years is measured at the date your proposal is filed, on the single-date approach the Supreme Court of Canada settled in Piekut v. Canada (National Revenue), 2025 SCC 13, itself a case about a completed consumer proposal. If your seven years are up at filing, student debt can be included; if not, it cannot, and it will still be owing when your proposal is done.

The Act also has a separate hardship route for student loans; raise it with your Trustee if it might apply to you.

Secured debts are in a category of their own. A mortgage or car loan is secured against an asset, and a proposal does not rewrite it. Keep paying the mortgage and you keep the house; keep paying the car loan and you keep the car. If you no longer want the car, or a home you cannot sustain, and you hand the asset back, any shortfall left after the lender sells it becomes an unsecured debt that can go into the proposal. But this does not happen automatically, and the point deserves emphasis. If it is your intention at the date of the consumer proposal to stop making payments on your car or your home, that intention must be clearly expressed in the consumer proposal itself. Your creditors are then on notice of two things: the secured lender is on notice that any shortfall, an unsecured debt of an amount to be determined once the asset is sold, is to be included in the proposal, and the other participating creditors are on notice that a claim by that secured creditor, for an amount not yet known, will share in the proposal alongside their own. It cannot be emphasized strongly enough that this is a decision made at sign-up, not one that can simply be renegotiated after the proposal is in force. The general rule is otherwise simple: keep paying a secured loan and both the asset and the loan continue untouched by the proposal.

What follows is the whole sequence, at the level of what happens and why.

How long each step takes is on the timeline page, and how the payment is calculated is on the cost page. This page carries no fee schedule or payment formula, because those have a single home and duplicating them only invites two versions that drift apart.

The cast, in one view.

You, the debtor, make the proposal and make the payments. The Licensed Insolvency Trustee, as administrator, runs the process: assesses your situation, prepares and files the documents, deals with your creditors, holds any meeting, distributes your payments, and issues your completion certificate. The Trustee is a licensed officer with duties to both you and your creditors, which is why the role is regulated rather than a matter of taking your side.

The Office of the Superintendent of Bankruptcy is the federal regulator. It licenses Trustees, sets the directives the process runs on, and keeps the public record of insolvency filings. Its officer, the Official Receiver, receives your filing and oversees the procedural checkpoints.

Your creditors are the people and institutions you owe. They receive notice, they may vote, and they are bound by the outcome. The Canada Revenue Agency, where you owe tax, is one of these creditors and votes like the rest; because it often behaves distinctively, its conduct is covered in the CRA garnishment article.

For orientation, the shape of a proposal from start to finish is: a first meeting and assessment; preparation and filing, when the stay of protection begins; a 45-day creditor period ending in acceptance, by a passed deadline or a vote; court approval, usually deemed; then the payment term of up to five years, during which the two counselling sessions happen; and finally the completion certificate. For that walked out month by month, see the timeline page.

Each answer below is complete on its own. If your question is about the cost, the bankruptcy comparison, your credit, or the Canada Revenue Agency, it has its own full page on this site, and the links in each answer take you straight there.