Consumer proposals in Canada: a complete guide to who qualifies, what it costs and what to expect

A consumer proposal is a legally binding deal, made under the federal Bankruptcy and Insolvency Act (BIA), in which you offer your unsecured creditors part of what you owe, more time to pay, or both. It is open to individuals whose debts, leaving aside any mortgage on their home, add up to $250,000 or less, and the payments can’t run past five years. A Licensed Insolvency Trustee sets it up and runs it from start to finish.

It is also the route most Canadians take when they file. In the 12 months to Aug. 31, 2026, proposals made up 78.0% of all consumer insolvencies, according to the Office of the Superintendent of Bankruptcy (OSB), the federal regulator (see our August numbers story).¹

What is a consumer proposal?

Think of it as a formal offer to settle. You and a trustee work out a monthly amount (or a lump sum) you can realistically afford. The trustee files the offer with the OSB and sends it to everyone you owe. If enough creditors go along with it, it binds all of your unsecured creditors, including the ones who said no.²

You pay the trustee, not your creditors. The trustee takes out the fees set by law and passes the rest on to creditors as the proposal says. When you have done everything the proposal requires, the debts it covers are released, apart from a few kinds of debt discussed below.³

Who qualifies for a consumer proposal?

The BIA calls an eligible person a “consumer debtor.”² To qualify, you must:

• be an individual, not a corporation;
• be insolvent (for example, unable to pay your debts as they come due) or already bankrupt; and
• owe $250,000 or less in total, not counting debts secured by your principal residence, such as your mortgage or a home equity line of credit registered against your home.²

Credit cards, car loans, lines of credit, payday loans and tax debt all count toward the limit. Above it, a Division I proposal may be possible, but the OSB notes that if creditors reject one, you become bankrupt automatically.⁴ Also, you can’t start a consumer proposal while a Division I proposal or notice of intention is still open in your name.²

How a consumer proposal is filed

Only a Licensed Insolvency Trustee can administer a consumer proposal.⁵ Under the Act, the process runs roughly like this:²

1. Assessment. The trustee looks into your property, income, debts and what led to your money problems, then reviews your options with you, including ones that aren’t insolvency filings.
2. Preparing the offer. Together you settle on a payment amount and term. You sign the proposal and a statement of affairs listing everything you own and owe.
3. Filing. The trustee files those documents with the official receiver at the OSB. From that moment, the protections described in the next section apply.
4. Report to creditors. Within 10 days, the trustee sends each known creditor the proposal, your statement of affairs, a proof-of-claim form and a report that gives the trustee’s opinion on whether the offer is reasonable and fair and whether you can keep it up.

If you are weighing whether a proposal fits your situation, Harris & Partners’ consumer proposal overview covers the same ground from a trustee’s practical side. Every Licensed Insolvency Trustee in Canada holds a federal licence, and you can look one up in the OSB’s federal trustee search.

What the stay of proceedings stops, and what it doesn’t

Filing triggers a stay of proceedings: a legal freeze on most collection. Unsecured creditors can’t start or continue lawsuits, garnish your wages or take other steps to collect what you owed at the filing date while the proposal is in place.² You also stop paying those creditors directly.³

The Act adds other protections. A landlord, lender or other party can’t cancel or change an agreement with you only because you’re insolvent or have filed. A utility can’t cut off service only because of unpaid bills from before the filing. An employer can’t fire, suspend or discipline you solely because you filed a proposal.²

The stay has limits:

• Secured creditors keep their rights. Your mortgage lender and car lender can still act on their security if you stop paying them.² Keep those payments current.
• It isn’t a credit line. Nobody has to lend you new money, and suppliers can ask you to pay cash for anything new.
• It doesn’t apply to a repeat filing made within six months of an earlier consumer proposal.²

How creditors accept or reject a proposal

Creditors have 45 days from filing to respond.³ Within that window:

• creditors whose claims together make up at least 25% of the dollar value of proven claims can require a meeting, and the OSB can also order one;
• any meeting must be held within 21 days of being called;
• votes are counted by dollar value, not by head, and a simple majority of that value decides it;
• a creditor related to you can vote against the proposal but not for it.²

If no meeting is required by day 45, the proposal is deemed accepted, even if some creditors objected. It is also deemed accepted if a meeting is held but too few creditors attend to make a quorum.²

Once creditors accept, there is a 15-day window in which the OSB, or anyone else with an interest, can request a court review. If nobody asks, the proposal is treated as approved by the court.² You can withdraw the proposal at any point before that approval. If creditors turn it down, you can revise and resubmit it, look at other options, or consider bankruptcy.³

Payments and the five-year limit

The Act says a consumer proposal “must provide that its performance is to be completed within five years.”² Within that ceiling, the terms are flexible. You might offer a single lump sum, monthly payments over a shorter period, or monthly payments over the full five years.

How much you pay depends on your income, what you own, what you owe and what your creditors will agree to. The OSB says most people repay a percentage of their debt, with the amount built around their circumstances and the reasons they got into trouble.⁵

How much does a consumer proposal cost?

You don’t write a separate cheque for the trustee. The OSB says consumer proposal fees “are regulated by the Bankruptcy and Insolvency Act,”⁵ and they are paid out of the money you send to the trustee before creditors receive anything. The amounts are set in the BIA General Rules:⁶

Item	Amount set by the BIA General Rules
Trustee fee on filing	$750
Trustee fee on court approval (or deemed approval)	$750
Trustee fee on money paid out to creditors	20% of each distribution
Counselling	$85 per individual session, or $25 per person per group session
OSB filing fee	$100
Federal levy on payments to creditors	5% (for amounts up to $1 million)
Other	A court registrar’s fee and applicable GST/HST

Because these come out of your agreed payments, they’re built into the amount you offer rather than billed to you separately. Many trustees offer a free first meeting; the OSB says trustees typically don’t charge for it, but ask about fees up front.⁴

The two counselling sessions

Everyone who files a consumer proposal attends two financial counselling sessions, led by a trustee or a qualified counsellor.³ They cover budgeting, spending habits and how to use credit going forward. This isn’t optional: if you refuse or neglect counselling, the trustee can’t issue the certificate that confirms you completed the proposal.²

What happens if you miss payments?

If your payments are monthly or more frequent, the proposal is deemed annulled the day you fall behind by an amount equal to three payments. If you pay less often than monthly, it’s annulled once any payment is three months overdue.² The court can also annul a proposal for other defaults or if it was approved through fraud.

Annulment has real consequences. Your creditors can go back to collecting what you owed, minus whatever they already received. Unless a court orders otherwise, you can’t make another consumer proposal, or get the protection of a new stay of proceedings, until the claims filed in the proposal are paid in full or released through a bankruptcy discharge.²

There are two safety valves:

• Amendments. If your income drops or your costs rise, the trustee can file an amended proposal with new terms before you hit the three-payment mark. Creditors vote on it the same way.²
• Revival. After a deemed annulment, the trustee may notify creditors that the proposal will automatically come back to life after 60 days unless one of them objects. The trustee can also ask a court to revive it.²

If you see trouble coming, talk to your trustee before you fall three payments behind.

Debts a consumer proposal doesn’t release

A proposal binds creditors for your unsecured debts, but a short list of debts generally survives. These are the same kinds of debt that a bankruptcy discharge doesn’t wipe out, listed in section 178 of the Act, including:²

• court fines, penalties and restitution orders;
• child support, spousal support and alimony;
• debts arising from fraud or from obtaining property under false pretences;
• court awards for intentionally inflicted bodily harm, sexual assault or wrongful death; and
• government student loans, depending on how long ago you stopped being a student.

The Act lets a proposal compromise one of these debts only if it expressly says so and that particular creditor votes in favour.² Secured debts, such as your mortgage and car loan, also stay in place on their usual terms.

Will I keep my house, car and RRSP?

Generally, yes. The OSB says that if your proposal is accepted you keep your assets, provided you keep up your payments to secured creditors such as your mortgage lender or car lender.³ That is one of the main differences from bankruptcy, where a trustee takes and sells assets that provincial or federal law doesn’t protect.⁴

Owning things still matters. The trustee has to investigate your property and tell creditors whether the offer is reasonable and fair, so the value of your home equity, RRSPs and vehicles is in the statement of affairs and report that creditors have in front of them when they decide.² If you own land or other valuable property, the Act also lets the trustee register a certificate against it until the proposal is fully performed.²

How a consumer proposal affects your credit report

The OSB reports every consumer proposal to Equifax and TransUnion, and notes that people who file one are generally given the lowest possible credit score.³⁵ According to the Financial Consumer Agency of Canada, both bureaus remove the proposal three years after you finish paying it, or six years after you sign it, whichever comes first.⁷

Credit cards that carry a balance when you file will be cancelled by the lender, though you may be able to keep a card with nothing owing, and a secured card or small-limit card may be possible during the proposal.⁵ Proposals also become part of the public insolvency records the OSB keeps.⁴

The certificate of full performance

When you’ve made every payment and finished counselling, the trustee issues a certificate of full performance to you and to the OSB.² Keep it. The OSB recommends sending a copy to the major credit bureaus to make sure your file is updated, and holding on to your proposal papers for future lenders.³

Consumer proposal or bankruptcy?

Both are formal processes under the same Act, and both stop most collection. The main differences:

At a glance	Consumer proposal	First bankruptcy
Debt limit	$250,000, excluding debts secured by your home	None
Your assets	Generally kept	Non-exempt assets go to the trustee
Length	Up to 5 years	9 months, or 21 with surplus income payments
Creditor vote	Yes	No
Credit report	3 years after completion or 6 after signing, whichever is first	6 or 7 years after discharge, depending on province

Sources: OSB and FCAC.⁵⁷

A proposal can suit people with steady income and assets they want to protect, while bankruptcy may cost less overall for someone with a low income and few non-exempt assets. Our guide to bankruptcy in Canada covers that process in detail, and there are provincial guides for Ontario, British Columbia, Alberta and Nova Scotia.

Frequently asked questions

How long does a consumer proposal take?

It can’t last more than five years. If no meeting or court review is requested, the proposal is deemed approved by the court about 60 days after filing: 45 days for creditors to respond, then 15 days for anyone to ask for a review.² After that, the length depends on the payment schedule you agreed to.

Can I pay off a consumer proposal early?

That depends on the terms of your proposal, so ask your trustee. If you do finish ahead of schedule, it can also shorten how long the proposal shows on your credit report, because the bureaus remove it three years after you pay it off or six years after you sign, whichever comes first.⁷

Will my employer find out?

Your employer may learn of it if a wage garnishment stops, or if the trustee takes an assignment of your wages to secure the payments, which the Act allows. Either way, the Act prohibits an employer from dismissing, suspending, laying off or disciplining you solely because you filed.²

Can I file a consumer proposal if I’m already bankrupt?

Yes. A bankrupt person who meets the debt limit can make a consumer proposal. If the court approves it, the bankruptcy is annulled.²

Footnotes

1. Office of the Superintendent of Bankruptcy, Insolvency Statistics in Canada, August 2026. https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/statistics-and-research/insolvency-statistics/monthly-reports/insolvency-statistics-canada-august-2026 ↩

2. Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 66.11–66.4 (consumer proposals), s. 69.2 (stay of proceedings) and s. 178(1) (debts not released). https://laws-lois.justice.gc.ca/eng/acts/B-3/FullText.html ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸ ↩⁹ ↩¹⁰ ↩¹¹ ↩¹² ↩¹³ ↩¹⁴ ↩¹⁵ ↩¹⁶ ↩¹⁷ ↩¹⁸ ↩¹⁹ ↩²⁰ ↩²¹ ↩²² ↩²³ ↩²⁴ ↩²⁵ ↩²⁶

3. Office of the Superintendent of Bankruptcy, “You owe money: consumer proposals.” https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/you-owe-money/you-owe-money-consumer-proposals ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸

4. Office of the Superintendent of Bankruptcy, “Consumed by debt? Information for consumers on the insolvency process.” https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/you-owe-money/consumed-debt-information-consumers-insolvency-process ↩ ↩² ↩³ ↩⁴

5. Office of the Superintendent of Bankruptcy, “Compare debt solutions.” https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/you-owe-money/compare-debt-solutions ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶

6. Bankruptcy and Insolvency General Rules, C.R.C., c. 368, Rules 123(2), 129(1), 131(1) and 132(1)(c). https://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._368/FullText.html ↩

7. Financial Consumer Agency of Canada, “How long information stays on your credit report.” https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/information-credit-report.html ↩ ↩² ↩³