Understanding What Is A Consumer Proposal Explained Clearly

Eligibility Criteria and Qualification for a Consumer Proposal in Canada

Financial Thresholds and Debt Limits

Key considerations for debt assessment:

Debt Calculation Formula for Eligibility:
Total Unsecured Debt = (Credit Card Balances + Personal Loans + Lines of Credit + Eligible Tax Arrears) – (Secured Debt Collateral Value)
If Total Unsecured Debt ≤ $250,000, the individual may qualify.

Types of Debts Covered and Exclusions

Excluded debts that cannot be included in a consumer proposal:

Important Note:
While secured debts are not part of the consumer proposal process, creditors may still require repayment or may repossess collateral if terms are not met. Negotiating secured debts separately is recommended.

Non-Financial Eligibility Conditions

Common Misconceptions About Consumer Proposal Eligibility

• Misconception: "Only individuals with extremely high debt can file a consumer proposal." Clarification: While the $250,000 limit is relatively high, many individuals with moderate to high unsecured debt (e.g., $50,000–$200,000) qualify. The threshold is designed to accommodate a broad range of financial situations, not just severe debt cases.
• Misconception: "Secured debts like mortgages can be included in a consumer proposal." Clarification: Secured debts are not part of the consumer proposal process unless negotiated separately with the creditor. Including them would void the proposal’s legal protections.
• Misconception: "If I have joint debt with my spouse, both of us must file a consumer proposal." Clarification: Only the debtor filing the proposal is bound by its terms. However, creditors may still pursue the co-signer or joint account holder for the full amount if the proposal does not cover their share. Co-debtors are not automatically included.
• Misconception: "I can file a consumer proposal if I’m self-employed but have no business debts." Clarification: Self-employed individuals are eligible as long as their personal unsecured debts meet the $250,000 limit. Business debts (e.g., corporate loans, commercial mortgages) are not covered and must be addressed separately.
• Misconception: "Filing a consumer proposal will automatically discharge all my debts." Clarification: A consumer proposal reduces or extends payments but does not discharge debts outright. Upon completion, remaining eligible debts are forgiven, but secured debts and excluded debts (e.g., student loans under 7 years) remain the applicant’s responsibility.
• Misconception: "I can only file if I’m already in severe financial distress." Clarification: Individuals may file proactively if they anticipate insolvency (e.g., due to job loss, medical expenses, or overwhelming debt). Early intervention often yields better negotiation outcomes.
• Misconception: "Government debts like EI or CPP contributions can be included." Clarification: These debts cannot be part of a consumer proposal. They must be addressed through other repayment programs or government arrangements.

Step-by-Step Financial Evaluation Process

1. Calculate Total Unsecured Debt:
   
2. Sum all unsecured liabilities (credit cards, loans, medical debts, eligible tax arrears).
3. Exclude secured debts (e.g., mortgages, car loans) unless negotiating separately.
4. Verify the total does not exceed $250,000 CAD.
5. Assess Secured Debts and Collateral:
   
6. List all secured debts and their current balances.
7. Determine if any secured creditors are willing to negotiate terms (e.g., loan extensions, reduced interest rates).
8. Note that secured debts cannot be included in the proposal but may be restructured independently.
9. Review Income and Expenses:
   
10. Compile monthly income (employment, self-employment, investments, government benefits).
11. Detail monthly expenses (housing, utilities, groceries, transportation, debt payments).
12. Calculate disposable income (income minus essential expenses) to assess affordability for proposed payments.
13. Identify Excluded Debts:
    
14. Confirm that debts like student loans (under 7 years), government fines, or fraudulent obligations are not part of the proposal.
15. Separate these from eligible debts to avoid misrepresentation.
16. Consult a Licensed Insolvency Trustee (LIT):
    
17. An LIT evaluates the financial assessment and provides a feasibility analysis based on:
18. Debt-to-income ratio.
19. Likelihood of creditor acceptance.
20. Alternative solutions (e.g., debt consolidation, credit counseling) if the proposal is not viable.
21. Prepare Documentation:
    
22. Gather proof of debt (statements, loan agreements).
23. Provide tax filings (if including tax arrears).
24. Submit proof of residency (e.g., utility bills, lease agreement).
25. Compile pay stubs or financial statements for income verification.

    

    How a Consumer Proposal Works: Step-by-Step Process

    A consumer proposal in Canada is a legally binding debt settlement process under the Bankruptcy and Insolvency Act (BIA) that allows individuals to negotiate reduced payments with creditors while avoiding bankruptcy. The process involves structured interactions between the debtor, a Licensed Insolvency Trustee (LIT), creditors, and, in some cases, the court. Below is a detailed breakdown of the procedural steps, roles, and key considerations at each stage, followed by a hypothetical scenario illustrating the process in practice.
    

    Step-by-Step Process Overview

    The consumer proposal process is collaborative, requiring precise documentation, negotiation, and compliance with legal requirements. The following table outlines the chronological sequence of actions, responsibilities, and critical considerations for all parties involved.
    

    Step	Action Required	Key Considerations
    1. Initial Consultation with a Licensed Insolvency Trustee (LIT)	Debtor provides financial documents (income statements, debt listings, assets, and expenses) to the LIT.	Accuracy of debt listings, including secured vs. unsecured debts, and disclosure of all creditors.
    	LIT assesses eligibility, reviews financial viability, and explains proposal terms (e.g., repayment period, creditor implications).	Understanding of legal protections (e.g., wage garnishment halts) and potential alternatives (e.g., debt consolidation).
    2. Preparation and Drafting of the Proposal	LIT drafts the proposal, detailing repayment terms (amount, duration, and structure) based on debtor’s financial capacity.	Compliance with BIA requirements (e.g., minimum repayment period of 90 days, maximum 5 years for individuals).
    	Debtor reviews and approves the proposal; LIT files it with the Office of the Superintendent of Bankruptcy (OSB).	Ensuring the proposal reflects a "fair and equitable" offer to creditors, as per BIA Section 66.
    3. Creditor Notification and Response Period	OSB notifies creditors of the proposal; creditors have 45 days to vote on acceptance.	Majority creditor approval by dollar value (not headcount) is required for approval.
    	LIT communicates with creditors to address concerns, negotiate adjustments, or gather votes.	Creditors may reject if the offer is deemed insufficient; secured creditors (e.g., mortgage holders) are typically excluded.
    	If approved, the proposal becomes legally binding; if rejected, the debtor may file for bankruptcy or renegotiate.	Debtor’s credit score is affected (typically remains for 3 years post-completion).
    4. Court Approval (If Required)	Proposal is submitted to court for validation if creditors’ claims exceed $5,000 or if disputes arise.	Judicial oversight ensures fairness; court may modify terms if creditors’ rights are violated.
    	Court approves the proposal, and the LIT distributes funds to creditors according to the agreed schedule.	Debtor must comply with all terms; failure may result in bankruptcy or legal action.
    5. Repayment Plan Execution	Debtor makes regular payments to the LIT, who distributes funds to creditors proportionally.	Payments are typically monthly; interest on unsecured debts is frozen during the process.
    	LIT monitors compliance; upon completion, the debtor receives a discharge, releasing remaining eligible debts.	Secured debts (e.g., car loans) are not included unless restructured separately.
    6. Completion and Discharge	LIT files a final report with the OSB, confirming full repayment; debtor’s legal obligations under the proposal are terminated.	Debtor regains control over assets (e.g., non-exempt property) and may rebuild credit post-discharge.

    Roles and Responsibilities Summary:
    
26. Debtor: Provides accurate financial information, adheres to repayment terms, and avoids incurring new unsecured debt.
27. Licensed Insolvency Trustee (LIT): Acts as a neutral intermediary, files the proposal, negotiates with creditors, and ensures compliance with BIA.
28. Creditors: Vote on the proposal within the 45-day window; secured creditors may pursue separate remedies (e.g., repossession).
29. Office of the Superintendent of Bankruptcy (OSB): Oversees the process, notifies creditors, and maintains records.
30. Court: Validates the proposal if disputes or high-value claims exist, ensuring equitable treatment.

Hypothetical Scenario: A Consumer Proposal in Practice

Case Overview:
John Doe, a 35-year-old Canadian resident, owes $75,000 in unsecured debt, comprising:

31. $30,000 in credit card balances (18% interest),
32. $25,000 in medical debt (no interest),
33. $20,000 in personal loans (12% interest).

John’s monthly disposable income (after essential expenses) is $1,200, and he owns a home (mortgage-free) and a car worth $15,000 (with a $10,000 loan). He approaches a Licensed Insolvency Trustee (LIT) to explore alternatives to bankruptcy.

Step-by-Step Progression:

1. Initial Consultation:


34. John provides his financial statements, including debt schedules, income proof, and asset valuations.
35. The LIT determines John is eligible (total debt < $250,000, primarily unsecured) and explains that a consumer proposal could reduce his debt by 50–70% over 3–5 years.
36. Key Consideration: John’s car loan is secured; the LIT advises he must continue payments to avoid repossession.

2. Proposal Drafting:


37. The LIT proposes a 5-year repayment plan offering creditors 60 cents on the dollar, totaling $45,000 (including administrative fees of $3,000).
38. The plan includes:
39. Monthly payment: $800 (adjusted for inflation if applicable).
40. Interest freeze on unsecured debts during the proposal period.
41. Legal Basis: The proposal complies with BIA Section 66, requiring creditors to accept the offer as a whole.

3. Creditor Notification and Voting:


42. The OSB notifies creditors, who have 45 days to vote.
43. Creditor Responses:
44. Credit card companies (65% of debt): Accept the proposal to recover $18,000 (vs. potential $0 in bankruptcy).
45. Medical debt holders (33% of debt): Accept immediately (no further recovery expected).
46. Personal loan lenders (2% of debt): Reject, citing insufficient offer, but hold <10% of total claims.
47. Result: 75% of creditors by dollar

Legal and Financial Implications of a Consumer Proposal in Canada

A consumer proposal in Canada offers debtors a structured path to financial recovery while providing legal protections against creditors. However, the process carries significant legal and financial consequences that extend beyond debt repayment. Understanding these implications—including automatic legal safeguards, credit score impacts, tax obligations, and long-term financial trade-offs—is essential for individuals evaluating whether a consumer proposal aligns with their financial goals.

The legal framework governing consumer proposals under the Bankruptcy and Insolvency Act (BIA) provides immediate relief from collection actions while imposing obligations on debtors. Financially, the proposal’s terms—such as repayment duration and reduced debt amounts—directly influence creditworthiness and future borrowing capacity. Additionally, tax considerations arise from forgiven debt, particularly for secured creditors or debts classified as income by the Canada Revenue Agency (CRA). Below, the legal protections, financial repercussions, and comparative trade-offs are examined in detail.


Legal Consequences of Filing a Consumer Proposal

Upon filing a consumer proposal, the debtor benefits from an automatic stay, a legal injunction that halts most creditor actions, including:

48. Wage garnishments or bank account seizures.
49. Lawsuits or legal proceedings for unsecured debts.
50. Creditor harassment or demands for immediate repayment.

Ongoing legal proceedings (e.g., existing lawsuits or garnishments) are paused, though secured creditors (e.g., mortgage holders) retain their rights over collateral. The proposal must be approved by creditors holding at least 50% of the total debt by dollar value, though dissenting creditors may still pursue legal recourse in limited circumstances.

A key distinction exists between unsecured debts (e.g., credit cards, personal loans) and secured debts (e.g., car loans, mortgages). Secured creditors are not bound by the proposal unless they agree to include their debt or the collateral is surrendered. Failure to comply with the proposal’s terms—such as missing payments—can lead to dismissal by the Licensed Insolvency Trustee (LIT) or conversion to bankruptcy, revoking the automatic stay.


Impact on Credit Scores and Future Borrowing Capacity

Filing a consumer proposal results in a notable but temporary decline in credit scores, typically ranging from R1 (default) to R7 (proposal) on Equifax and 6 (serious delinquency) to 9 (proposal) on TransUnion. The impact varies by credit bureau but generally persists for 3–6 years post-completion, depending on repayment adherence.

Future borrowing capacity is affected as follows:


51. Credit Limits: Lenders may impose stricter limits or require higher interest rates for 2–5 years post-proposal.
52. Mortgage Approvals: Some lenders (e.g., major banks) may require a minimum 2–3 year waiting period before approving a new mortgage, though private lenders or alternative financing may be available sooner.
53. Secured Debt Restrictions: Obtaining new secured loans (e.g., auto financing) may require larger down payments or co-signers during the recovery period.

Example: A debtor with a 700+ credit score pre-proposal may see it drop to 550–600 during the proposal but gradually recover to 650+ within 2–3 years if payments are consistent. However, high-risk borrowers (e.g., those with multiple proposals or bankruptcies) may face prolonged restrictions.


Tax Implications of Forgiven Debt

The tax treatment of forgiven debt under a consumer proposal depends on the debt type and creditor classification. Key considerations include:

54. Unsecured Debt: Forgiveness is not taxable income under the BIA, as it is considered a settlement rather than income.
55. Secured Debt: If a secured creditor (e.g., a bank holding a car loan) forgives a portion of the debt, the forgiven amount may be taxable as income if the collateral’s fair market value exceeds the remaining debt. This scenario is rare in consumer proposals but applies to commercial debts or co-signed loans.
56. Canada Revenue Agency (CRA) Debts: Tax debts included in a consumer proposal are not added to the debtor’s taxable income, but interest and penalties accrued before filing may still be claimable.

Example: If a debtor owes $10,000 on a car loan secured by a vehicle worth $8,000, the $2,000 forgiven amount could be taxable as income. However, most consumer proposals involve unsecured debts, which are exempt from this rule.


Long-Term Financial Trade-Offs: Consumer Proposal vs. Alternatives

A consumer proposal offers distinct advantages and disadvantages compared to alternatives like debt consolidation, credit counseling, or bankruptcy. Below is a comparative analysis of key financial trade-offs:


Consumer Proposal


Pros:

Preserves assets (e.g., home, vehicle) if secured debts are managed separately.

Reduces unsecured debt by 50–75% without full repayment.

Legal protections against creditor actions (automatic stay).

Faster credit recovery (3–6 years) than bankruptcy (6–7 years).

Cons:

Public record on credit bureau for 3 years.

Requires regular payments (typically 60–96 months).

Failed proposals may lead to bankruptcy.

Co-signers remain liable for secured debts not included in the proposal.

Debt Consolidation Loan


Pros:

Single monthly payment with potentially lower interest rates.

No public record if managed responsibly.

No asset liquidation required.

Cons:

Requires good credit (650+ score) for favorable terms.

Secures new debt against collateral (e.g., home equity), risking asset loss if payments fail.

Does not eliminate debt; extends repayment timeline.

Credit Counseling (Debt Management Plan - DMP)


Pros:

No legal protections; creditors can still pursue collections.

May include lower interest rates negotiated by a non-profit agency.

No impact on credit score if payments are current.

Cons:

No debt reduction; requires full repayment over 3–5 years.

Limited to unsecured debts; secured debts must be handled separately.

Fees apply (typically $30–$75/month).

Bankruptcy


Pros:

Immediate debt relief for most unsecured debts.

Stays on credit report for 6–7 years (shorter than a proposal in some cases).

No further payments required for dischargeable debts.

Cons:

Asset liquidation (e.g., non-exempt property sold).

Longer credit impact than a proposal.

Public record for 7 years post-discharge.

Potential surplus income payments if earnings exceed provincial thresholds.

Key Decision Factors:

57. Asset Protection: Choose a consumer proposal or bankruptcy if secured debts threaten assets.
58. Debt Reduction Need: A proposal or bankruptcy offers greater debt relief than consolidation or counseling.
59. Credit Recovery Timeline: Proposals allow faster credit rebuilding than bankruptcy.
60. Income Stability: If irregular income is a concern, a proposal’s structured payments may be preferable to a DMP’s flexibility.

Risks and Unintended Consequences

While a consumer proposal mitigates immediate financial stress, several risks warrant careful consideration:

Failed Proposals


61. Creditor Objections: If <50% of creditors by dollar value approve the proposal, it fails, and the debtor may face bankruptcy or continued collection actions.
62. Payment Defaults: Missing payments triggers dismissal by the LIT, revoking the automatic stay and exposing the debtor to lawsuits or garnishments.

Creditor-Specific Risks


63. Secured Creditors: If a proposal excludes a secured debt (e.g., a car loan), the creditor can repossess collateral if payments are missed.
64. Government Debts: While CRA debts are often included, student loans (if owed for <7 years) may require separate arrangements.

Impact on Co-Signers and Spouses


65. Co-Signed Loans: If a co-signer’s debt is not included in the proposal, they remain fully liable for repayment.
66. Joint Debts: Spouses or common-law partners are not automatically relieved of joint debts (e.g., credit cards) unless they are separately included in the proposal.
67. Asset Division: In shared assets (e.g., a matrimonial home), a



Negotiation and Customization of Proposal Terms

Consumer proposals in Canada are not one-size-fits-all solutions but are negotiated agreements tailored to the debtor’s financial circumstances and creditor priorities. The terms of a proposal—including repayment amounts, duration, and asset protections—are determined through collaborative discussions among the debtor, licensed trustee, and creditors. Effective negotiation ensures the proposal maximizes debt reduction while remaining sustainable for the debtor, balancing legal compliance with financial realism. Creditors evaluate proposals based on their likelihood of recovery compared to alternative options, such as bankruptcy or unsecured claims in a bankruptcy estate.

The negotiation process hinges on three critical factors: the debtor’s disposable income, creditor priorities, and the trustee’s recommendations. Disposable income, calculated after essential living expenses, dictates the maximum feasible repayment amount without compromising the debtor’s financial stability. Creditor priorities, governed by the Bankruptcy and Insolvency Act (BIA), influence how much each creditor may receive, with secured creditors (e.g., mortgage holders) typically excluded from unsecured claims. The trustee’s role is pivotal, as they assess the proposal’s fairness, feasibility, and compliance with legal requirements before presenting it to creditors for approval.


Factors Influencing Term Negotiation

The negotiation of consumer proposal terms is shaped by objective and subjective financial metrics, legal constraints, and strategic considerations. Below are the primary factors that determine the structure of a proposal, ranked by their impact on repayment feasibility and creditor acceptance.


Key Principle: A viable consumer proposal must offer creditors a higher recovery rate than they would expect in a bankruptcy proceeding while remaining affordable for the debtor over the proposal period (typically 1–5 years).

1. Debtor’s Disposable Income and Expenses
   The foundation of any proposal is the debtor’s monthly surplus income after deducting approved living expenses, as defined by the BIA or provincial standards. Trustees use standardized expense guidelines (e.g., Office of the Superintendent of Bankruptcy’s [OSB] Living Expense Guidelines) to calculate this surplus. For example:
   • A debtor with $3,500/month income and $2,800/month expenses (including mortgage, utilities, and minimum debt payments) may have a $700/month surplus, which could fund a $500/month proposal payment (leaving a buffer for unexpected costs).
   • Debtors with variable income (e.g., self-employed individuals) may negotiate flexible payment plans, such as tiered payments tied to seasonal earnings or lump-sum offers during high-income periods.
2. Creditor Priorities and Claim Types
   Not all creditors are equal under a consumer proposal. The BIA establishes a priority hierarchy for unsecured claims, which directly affects how much each creditor may recover:

   Priority Level	Creditor Type	Recovery Rate in Bankruptcy (Estimate)	Typical Recovery in Proposal
   1	Government-owed debts (e.g., CRA, student loans in repayment period)	0–10% (varies by province)	10–50% (negotiable, often higher for tax debts)
   2	Secured creditors (e.g., car loans, mortgages)	100% (if collateral is retained)	Excluded (unless voluntarily included)
   3	Unsecured creditors (e.g., credit cards, medical bills)	5–20% (dividend from estate)	30–70% (varies by proposal terms)
   4	Guarantors or co-signers	0% (unless personally liable)	0–100% (if included in proposal)

   Example: A debtor with $50,000 in unsecured debt (split between credit cards and a CRA lien) might propose $30,000 total repayment ($600/month over 5 years), offering credit card holders 50% recovery while prioritizing the CRA’s claim (which could receive 40%). Secured creditors are excluded unless the debtor voluntarily includes them to protect assets (e.g., a car loan).
3. Trustee’s Recommendations and Market Standards
   Trustees leverage their experience with historical recovery rates and industry benchmarks to advise on realistic terms. For instance:
   • Proposals offering <30% recovery to unsecured creditors are rarely approved unless the debtor has significant assets or high disposable income.
   • Proposals exceeding 70% recovery may be rejected if creditors could achieve similar results through debt settlement negotiations outside the proposal process.
   • Trustees may recommend asset protection clauses (e.g., excluding a primary residence from seizure) in exchange for higher repayment percentages.
   Data Point: According to the OSB’s 2022–2023 annual report, ~70% of consumer proposals in Canada were accepted by creditors, with an average recovery rate of 45% for unsecured creditors.
4. Legal and Procedural Constraints
   The BIA imposes specific rules that limit negotiation flexibility:
   • Proposals must be filed with a licensed trustee and cannot be unilaterally modified without creditor consent.
   • Debtors cannot exclude specific creditors (e.g., spousal support obligations) without court approval.
   • Proposals must not discriminate among creditors of the same class (e.g., all credit card companies must be treated equally).
   • The maximum proposal duration is 5 years for individuals (longer for corporations).

Structuring Proposals for Optimal Debt Reduction

The goal of a well-structured consumer proposal is to minimize total debt repayment while ensuring creditor approval. This requires balancing aggressive negotiation tactics with realistic financial constraints. Two primary repayment structures—lump-sum offers and installment plans—are commonly used, each with distinct advantages depending on the debtor’s cash flow and creditor priorities.


Strategic Objective: Maximize the present value of creditor recoveries by aligning repayment terms with their time preferences (e.g., secured creditors prefer immediate payments, while unsecured creditors may accept deferred but guaranteed returns).

1. Lump-Sum Proposals: Immediate Settlement for Higher Recovery
   Lump-sum proposals involve a single payment covering a portion of the debt, typically offered when the debtor has liquid assets (e.g., inheritance, tax refunds, or sale proceeds). This structure is favored by creditors because it eliminates collection costs and provides immediate recovery, often exceeding what they would receive in bankruptcy.

   Example Scenario:

   Debt Type	Total Debt	Lump-Sum Offer	Recovery Rate	Creditor Preference
   Credit Cards	$30,000	$15,000 (50%)	50%	High (avoids prolonged collections)
   Medical Bills	$ A consumer proposal stands as a pragmatic bridge between financial distress and long-term stability, offering debtors a structured yet flexible means to resolve obligations without sacrificing essential assets or enduring the severe credit repercussions of bankruptcy. By leveraging the expertise of a Licensed Insolvency Trustee, individuals can negotiate terms that align with their disposable income while maximizing debt reduction—a process that not only halts collection pressures but also provides a clear timeline for financial renewal. While the impact on credit scores remains a consideration, the strategic advantages—such as asset protection, legal safeguards, and predictable repayment—position this solution as a cornerstone of debt management for those committed to rebuilding their financial foundation. Ultimately, the success of a consumer proposal hinges on transparency, proactive engagement, and a willingness to adhere to the agreed terms, ensuring a path forward rather than a temporary reprieve. FAQ What exactly is a consumer proposal in Canada, and how does it differ from other debt solutions? A consumer proposal in Canada is a legally binding agreement under the Bankruptcy and Insolvency Act where you propose to pay back a portion of your debts (often 20–70%) through a Licensed Insolvency Trustee. It’s an alternative to bankruptcy, freezing interest and legal actions while you repay over time (usually 1–5 years). Only available to individuals with unsecured debt under $250,000 (excluding mortgages). How does a consumer proposal work in Ontario, and who can file one? In Ontario, a consumer proposal is a formal debt-repayment plan filed through a Licensed Insolvency Trustee, approved by your creditors. It stops wage garnishments and lawsuits, and you must keep up payments for 90% of creditors to accept it. Only individuals (not businesses) with unsecured debts under $250,000 can file, and it’s legally binding once creditors vote to accept it. What is a consumer proposal in British Columbia, and does it affect my credit score? In BC, a consumer proposal is a court-approved debt settlement plan where you repay a fraction of what you owe over time through a trustee. It stays on your credit report for 3 years after completion (vs. 6–7 years for bankruptcy) and is noted as "R7" on your credit file. Creditors must accept the plan if at least 50% of them (by dollar value) agree. Can I file a consumer proposal in Alberta, and what debts does it cover? Yes, Alberta residents can file a consumer proposal to consolidate unsecured debts like credit cards, lines of credit, and personal loans—not secured debts (e.g., mortgages, car loans) or student loans (unless you’ve been out of school for 7+ years). A Licensed Insolvency Trustee negotiates terms with creditors, and the plan must be followed for it to be legally binding. What is a consumer proposal for debt, and is it better than bankruptcy? A consumer proposal is a legal debt-relief option where you repay part of what you owe (often 30–70%) through structured monthly payments over 1–5 years. It’s often preferable to bankruptcy because it lets you keep assets (like your home or car), avoids wage garnishment, and has a shorter credit impact (3 years post-completion vs. 6–7 for bankruptcy). What is a consumer proposal, and how does the process actually work step by step? A consumer proposal is a formal debt settlement negotiated by a Licensed Insolvency Trustee to repay creditors a portion of what you owe. The process starts with a credit counselling session, then the trustee files a proposal with creditors; if accepted (by majority vote), you repay monthly while they handle all communications. If you miss payments, the proposal fails, and you may face bankruptcy. The trustee gets paid from the repayment amount. consumer proposal canada debt relief strategies financial recovery solutions insolvency-alternatives licensed insolvency trustee Leave a Comment Name Comment Post Comment Comments are moderated before appearing. The data you submit is processed according to the Privacy Policy of Voltefac.