Consumer Proposal Canada: A Negotiated Debt Settlement Plan

Consumer Proposals: Negotiating a Debt Settlement Plan With Your Creditors

By the fourth quarter of 2019, Canadian debt rose to a combined total of around $769.4 billion.

That equates to roughly $1.79 in credit market debt for every dollar of expendable income and is part of the reason that the Bank of Canada is getting hot under the collar about our debt situation as a nation.

This situation is so dire that as many as two in five Canadians believe that they will never be debt-free.

That’s hardly surprising considering that, when we think about debt management, we often consider options like consolidation loans, which, while useful, are more a transferral than a clearance.

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Luckily, there are other options, and not all of them mean bankruptcy.

For instance,consumer proposals can help to clear debts by as much as 70%.

And, this option has been rising the ranks of popularity for a few years now, with proposals growing by 7.4% in one year alone, compared with just a 0.1% increase in bankruptcy claims.

The question is, what exactly is a consumer proposal, and would this solution suit your unique debt dilemmas?

Consumer Proposal Canada: The Process

Much like bankruptcy, a consumer proposal is a legally binding settlement agreement that must be filled by a licensed trustee.

Unlike bankruptcy, the aim of this agreement is not to eliminate your debts, but rather to settle on a percentage of what you owe in mind of clearing them through reassessed agreements.

These payments often reduce overall debts by as much as 70%, with many claimants managing to agree to payments of around thirty cents for every owed dollar.

Though, of course, amounts vary depending on your creditors and your unique debt situation.

Your creditors will have 45 days to respond after submission of your proposal, with a majority of at least 50% + 1 necessary before you can proceed.

Your payments will then typically be spread across a maximum of five years, and tend to be interest-free.

Not all debts are relevant for a consumer proposal claim, but those that are include:



How you could benefit

When compared with other debt-relief options, the benefits of consumer proposals as an alternative are plain to see.

For one, this is the only debt settlement program sanctioned by the Canadian government, meaning that it’s an automatically secure route to go down.

What’s more, the consumer proposal path allows you to:


  • Keep control of your assets;
  • Consolidate debts into a payment that works for your budget;
  • Avoid high-interest rates;
  • Repay at a pace, and amount, that suits you;
  • Avoid bankruptcy;
  • Etc.


As if that weren’t enough, the protection your consumer proposal grants you from creditor actions can make a massive difference in providing you with a peace of mind that you likely haven’t enjoyed since debt entered your life.

Are you eligible?

Consumer proposals are a federally regulated program, so all claimants must meet a set of basic eligibility requirements before they can proceed.

The most pressing of these is, obviously, the fact that you must be insolvent.

AKA, you must owe at least $1,000 to creditors, and be unable to pay this amount in full.

You must also:


  • Be a Canadian resident or hold Canadian property
  • Have overall debts exceeding no more than $250,000 (excluding your mortgage)
  • Be able to maintain the payments outlined in your proposal
  • Have no prior proposal proceedings


Proceeding with a consumer proposal

If you meet the eligibility requirements and your debts fall under the consumer proposal program, then it’s vital you pair with a licensed insolvency trustee in your local area.

Known as consumer proposal administrators, these individuals will advise and make your proposal for you.

As officers of the court, a trustee’s primary responsibility is to collect debts for your creditors.

But, they’ll work with you every step of the way, ensuring that you settle on the right deal.

Here at Bankruptcy Canada, we’re proud to work with the best and most experienced trustees in the country.

They’ve helped 200,000 Canadians across our 430 trustee offices, and they’re waiting and ready to provide you with a no-obligation, free phone consultation that helps begin your consumer proposal process. Simply start browsing our trustee library today.

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal

Gordon Sands

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