Are You Eligible For A Consumer Proposal?

Understanding Consumer Proposal: Are You Eligible?

Financial difficulties can be overwhelming, and finding the right solution to manage your debts can be a daunting task. One viable option to consider is a consumer proposal. But the question arises, Are You Eligible for a Consumer Proposal?

In this comprehensive guide, we’ll explore consumer proposals, the eligibility criteria, advantages, and factors to consider. This article aims to provide you with necessary insights to determine if a consumer proposal is the right debt solution for you.

What is a Consumer Proposal?

A consumer proposal is a legal procedure regulated by the federal government, offering individuals an opportunity to settle their debts by paying a portion of what they owe to their creditors. It’s a debt settlement agreement negotiated by a Licensed Insolvency Trustee (LIT) on behalf of the debtor.

Key Features of a Consumer Proposal


  • It’s a legally binding agreement between you and your creditors.
  • It offers flexibility in repayment plans, often involving reduced monthly payments.
  • The process is overseen by a Licensed Insolvency Trustee.
  • It provides immediate protection from debt collectors.
  • The agreement must be approved by the majority of the creditors in dollar value.

Eligibility Criteria for a Consumer Proposal

Before considering this option, it’s crucial to understand the eligibility criteria:


Individual Filing:
Only individuals can file a consumer proposal; corporations are not eligible.

Debt Limit:
Your debts, excluding those secured by your principal residence (like mortgages or property taxes), should not exceed $250,000. If your debts go beyond this limit, you can file a Division I proposal.

Insolvency Status:
You must be insolvent, i.e., unable to repay your debts as they come due or if your liabilities exceed your assets.

Canadian Residency or Property:
You must either be a resident of Canada, carry on business, or own property in Canada.

You must be at least 18 years old.

Stable Income:
You should have a consistent income to make the agreed monthly payments under the proposal.

Types of Debts Covered in a Consumer Proposal

Consumer proposals typically deal with unsecured debts, which are not backed by an asset. These may include:


  • Credit card debts;
  • Unsecured loans or lines of credit;
  • Payday loans;
  • CRA debts;
  • Outstanding bill payments.

The Role of a Licensed Insolvency Trustee (LIT)

An LIT plays a vital role in the consumer proposal process. They assess your financial situation, help you understand whether a consumer proposal is the right solution for you, and guide you through the process if it is.

The Process of Filing a Consumer Proposal

Here’s a step-by-step guide to filing a consumer proposal:


  1. Meeting with an LIT
    The process begins with an initial consultation with an LIT, who will assess your financial situation and guide you accordingly.
  2. Filing the Proposal
    If it’s determined that a consumer proposal is the best fit for you, the LIT will prepare a formal proposal to your creditors.
  3. Review by Creditors
    Your unsecured creditors will review the proposal and decide whether to accept the offer.
  4. Approval and Implementation
    If the majority of the creditors accept the proposal, it becomes legally binding, and the repayment plan goes into effect.

Joint Consumer Proposals

For individuals with shared debts, filing a joint consumer proposal can be a suitable option. However, they must meet specific requirements, including having the same debts and a total debt of under $500,000 (excluding the mortgage on their principal residence).

Filing a Consumer Proposal after Bankruptcy

Even if you’ve previously declared bankruptcy, you can still qualify for a consumer proposal. This option can be particularly beneficial if you’ve obtained a stable income source after declaring bankruptcy, which could potentially lead to a surplus income situation.

Conclusion: Is a Consumer Proposal Right for You?

Consumer proposals can be an effective way to manage your debts. However, it’s crucial to understand the eligibility criteria and process thoroughly. Consider consulting with a Licensed Insolvency Trustee to determine if this option is the right solution for your unique financial situation.

Remember, every financial situation is unique, and what works for one person may not work for another. Therefore, it’s essential to carefully evaluate your options and seek professional advice before making a decision.

If you’re struggling with debt, don’t lose hope. There are various solutions available, and with the right guidance, you can regain control over your financial future.

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