September 5, 2017

Consumer proposals like bankruptcies are no panacea – they have pros and cons.


A consumer proposal is filed under a piece of legislation called the Bankruptcy & Insolvency Act. 

Only a licensed trustee in bankruptcy (often referred to as “an officer of the court” by debt consultants who are trying to hide the fact that all they did was refer you to a trustee in bankruptcy for a large sum of money) can file a consumer proposal.

A consumer proposal can reduce the face value of the debt you are paying off to pennies on the dollar or even less, depending on your circumstances.

A consumer proposal can allow you up to five years to pay off your debts without any interest accruing.

Your fees for filing the proposal are almost always included in your proposal payments and not charged as an additional amount.

When you have finished your consumer proposal – made the last payment – your credit bureau report will be upgraded to an R-7.

Once the majority of your creditors, 50% or more, have agreed to the terms of the proposal the rest are also bound by it.

Most proposals allow you to accelerate your payments and pay it off early if you are able to generate more income.

You can proposal out of a bankruptcy if your circumstances change.

Proposals can be filed jointly with other family members with whom you share liabilities and/or expenses.

You are not required to report your income to the trustee, and you do not lose your income tax refunds for the year of filing the proposal.


By their very nature proposals are more expensive than bankruptcies – a fundamental principle underlying the filing of the proposal is they should provide the creditors with a better return than a bankruptcy filing.

Trustees encourage proposals because they are easier to administer.

Proposals can stay on your credit report longer than bankruptcies.

Some lenders prefer to see a bankruptcy on a credit report over a proposal.

Once you have completed your proposal (often five years in length) credit will usually start to become available again within about two years, once you have finished your bankruptcy (often nine months) credit will usually start to become available again within about two years.

There is an upper limit on consumer proposals of $250,000 worth of debt, excluding a mortgage on a principal residence.

If your circumstances change it may be challenging to change your payment arrangements.

Should you not be able to sustain payments under the proposal you may end up filing a bankruptcy and have two insolvency proceedings showing up in your credit history.


Consumer Proposals can be a very useful tool but they are far from a “one size fits all” solution.  When you are having financial problems be sure that you have explored all of your options and make the right decision for you and your family.