Ontario Consumer Proposal Guide: Protect Your Home & Eliminate Debt
Consumer Proposal Ontario: Debt Proposal in ON
In Ontario, a consumer proposal is a debt-relief program offered by the government of Canada under Part III, Division II of the Bankruptcy and Insolvency Act (BIA) as an alternative to personal bankruptcy. It allows individuals to reduce their unsecured debt by up to 80% through a negotiated settlement with their creditors, with zero interest or penalties, administered exclusively by an OSB-registered Licensed Insolvency Trustee (LIT).
The Key Benefits of a Consumer Proposal in Ontario
A consumer proposal provides a structured, legally binding path to regain control of your finances while offering comprehensive legal protection:
- Significant Debt Reduction: Consolidate and reduce unsecured debts, typically agreeing to repay only 20% to 30% of the total amount owed over a manageable period.
- 100% Asset Protection: Unlike personal bankruptcy, a consumer proposal allows you to keep your home, car, investments, and personal possessions.
- Legal Creditor Protection: Once filed and accepted, a federal Stay of Proceedings prohibits creditors from taking legal action, freezing bank accounts, or issuing wage garnishments.
- Affordable, Interest-Free Payments: Make one predictable, fixed monthly payment for up to 5 years (60 months) with zero ongoing interest accrual.
- Faster Credit Rating Recovery: Results in an R7 credit rating, which is removed from Equifax and TransUnion credit reports 3 years after full completion (or 6 years from the filing date, whichever comes first).
Protecting Your Home & Property under Ontario Law
For most homeowners across Toronto, Ottawa, Hamilton, London, and regional Ontario, preserving home equity is the primary concern when evaluating debt relief. Under the Ontario Execution Act, net home equity is evaluated against statutory provincial exemption limits.
If your net equity exceeds the provincial exemption threshold of $12,997, filing for personal bankruptcy could put your home at risk or require substantial cash buybacks. In contrast, a consumer proposal completely eliminates asset seizure risk by building that equity value into your affordable monthly offer.
How Ontario Home Equity is Handled
Comparing real estate protection under Personal Bankruptcy vs. Consumer Proposal
Bankruptcy in Ontario
If your net home equity exceeds the provincial exemption limit of $12,997, you must pay the excess equity in cash to the bankruptcy estate or forfeit the home to the trustee for realization.
Consumer Proposal in Ontario
Keep your home 100% untouched. Equity is simply factored into a manageable, interest-free monthly offer made to your unsecured creditors over a period of up to 60 months.
Want to check if your home equity and personal assets are safe?
Free ConsultationOntario Asset Exemption Limits (2026 Standards)
Your Licensed Insolvency Trustee uses the provincial Ontario Execution Act limits as a benchmark to formulate a fair proposal that protects your personal belongings while satisfying your unsecured creditors:
2026 Ontario Bankruptcy Exemptions & Proposal Protections
Asset exemption limits under the Ontario Execution Act and Federal Insolvency Law
| Asset Category | 2026 Ontario Exemption Limit | Proposal Protection Rule |
|---|---|---|
| Principal Residence | $12,997 in equity |
100% Protected Excess equity is factored into your manageable monthly offer. |
| Primary Motor Vehicle | $8,578 in resale equity |
Keep Your Car Financed/leased vehicles are retained by maintaining regular payments. |
| Household Furnishings | $17,091 in value | Essential furniture and appliances are fully protected. |
| Tools of the Trade | $17,362 ($37,820 for farming) | Trades, self-employed contractors, and farmers keep their work tools. |
| RRSPs & RRIFs | 100% Exempt (Federal Law) | Protected except for contributions made in the 12 months prior to filing. |
| Personal Clothing | 100% Exempt (No dollar limit) | All necessary clothing for you and your dependants is protected. |
Excess equity is factored into your monthly offer.
Financed/leased vehicles are retained by maintaining regular payments.
Stopping Wage Garnishments & Bank Account Freezes
If a creditor has obtained a judgment against you in Ontario, they can secure a Notice of Garnishment to intercept up to 20% to 50% of your employment earnings or freeze your accounts at major Canadian banks and credit unions.
EMERGENCY PROTECTION ALERT
How an Ontario Consumer Proposal Halts Wage Garnishment: The moment an Ontario Licensed Insolvency Trustee files your consumer proposal with the OSB, a federal Stay of Proceedings takes effect.
Your trustee immediately serves official notification (Form 60H) to your employer, court enforcement office, or the CRA. By law, all wage garnishments, bank account freezes, and collection calls must stop instantly.
Who is Eligible & Which Debts Can Be Included?
To qualify for a Consumer Proposal in Ontario under federal law, you must meet the following criteria:
- Insolvency Status: You are unable to meet your debt obligations as they come due, or your total liabilities exceed your realizable assets.
- Unsecured Debt Threshold: Your total unsecured debt is at least $1,000 and does not exceed $250,000 (excluding the mortgage on your principal residence).
- Individual Status: You are an individual (not a corporation) residing or owning property in Canada.
- Income Capacity: You have a stable income source to support predictable monthly payments.
Debts Covered vs. Excluded under the BIA:
✓ Eligible Unsecured Debts
- Credit cards & retail store cards
- Personal lines of credit & overdrafts
- CRA Tax Debts (Income tax, GST/HST)
- Payday loans & installment loans
- Student loans (if out of school > 7 years)
✕ Excluded Debts (BIA Statutory)
- Mortgages & home equity loans
- Vehicle loans/leases (unless surrendered)
- Alimony & child support arrears
- Court-ordered fines or penalty fees
- Student loans under 7 years old
How to File a Consumer Proposal in Ontario
Working with an OSB-registered Licensed Insolvency Trustee ensures a structured, transparent process from initial consultation through to your complete debt discharge:
5 Steps to Becoming Debt Free
How an Ontario Consumer Proposal resolves your debt under federal protection
Free Consultation
With an Ontario Licensed Insolvency Trustee (LIT)
File Proposal
Triggers a Stay of Proceedings to stop collections instantly
Creditor Approval
Simple majority rule makes terms binding on all creditors
1 Fixed Monthly Payment
Zero interest, no hidden fees, locked in for up to 5 years
100% Debt Free!
Certificate Issued: Official discharge releases you from remaining debt
Connect with an OSB-Licensed Insolvency Trustee in Ontario
Take the First Step Toward Financial Freedom. To file an Ontario Consumer Proposal, you must work with a locally accredited Licensed Insolvency Trustee. Contact us today for a free, confidential consultation.
Find Your Personal Debt Relief Solution
Licensed Insolvency Trustees are here to help. Get a free assessment of your options.