Consumer Proposal Services in Toronto

Regaining Financial Stability Through Consumer Proposals: A Comprehensive Guide for Toronto Residents

As the cost of living in Toronto continues to soar, an increasing number of individuals find themselves grappling with overwhelming debt burdens. In such circumstances, a consumer proposal can offer a lifeline, enabling residents to negotiate a manageable repayment plan while safeguarding their assets. This comprehensive guide delves into the intricacies of consumer proposals in Toronto, providing a thorough understanding of the process, its advantages, and the potential drawbacks.

What is a Consumer Proposal?

A consumer proposal is a legally binding agreement between an insolvent individual and their creditors, facilitated by a Licensed Insolvency Trustee (LIT). Under this arrangement, the debtor proposes to pay a portion of their outstanding unsecured debts through periodic payments or a lump sum settlement. Once the creditors accept the proposal and the terms are fulfilled, the remaining debt is forgiven, offering the individual a fresh financial start.

The Role of Licensed Insolvency Trustees

Only Licensed Insolvency Trustees, professionals regulated by the federal government, are authorized to administer consumer proposals. These experts assess an individual’s financial situation, negotiate with creditors, and ensure compliance with the Bankruptcy and Insolvency Act. In Toronto, reputable firms like Hoyes Michalos, Spergel, and BDO Debt Solutions have established teams of experienced LITs dedicated to guiding clients through the consumer proposal process.

Eligibility Criteria for Consumer Proposals in Toronto

To be eligible for a consumer proposal in Toronto, an individual must meet the following criteria:

  • Total unsecured debt must exceed $1,000 but be less than $250,000 (excluding mortgage debt).
  • The individual must be insolvent, meaning they are unable to pay their debts as they become due.
  • They must not have had a previous consumer proposal annulled within the past two years.

If the total unsecured debt exceeds $250,000, a Division I Proposal may be an alternative option.

Advantages of Consumer Proposals in Toronto

Consumer proposals offer numerous advantages over other debt relief options, making them an increasingly popular choice among Toronto residents. Some key benefits include:

Significant Debt Reduction

One of the primary advantages of a consumer proposal is the potential to reduce unsecured debts by up to 80%. This substantial debt reduction can provide much-needed financial relief, enabling individuals to regain control over their finances.

Interest-Free Repayment Plan

Once a consumer proposal is accepted, interest charges on the included debts are frozen, and the repayment plan becomes interest-free. This can significantly reduce the overall cost of debt repayment, making it more manageable for individuals with limited incomes.

Protection from Creditors

Upon filing a consumer proposal, a stay of proceedings is automatically issued, protecting the debtor from further collection efforts, wage garnishments, or legal actions by creditors. This respite allows individuals to focus on fulfilling the terms of their proposal without the constant stress of creditor harassment.

Asset Preservation

Unlike bankruptcy, a consumer proposal allows individuals to retain ownership of their assets, including their home, vehicles, and investments. This feature is particularly attractive for Toronto residents who have accumulated significant equity in their properties or have valuable assets they wish to preserve.

Flexibility in Repayment Terms

Consumer proposals offer flexibility in repayment terms, with the option to spread payments over a maximum period of five years. This flexibility can accommodate individuals with fluctuating incomes or those who require more time to repay their debts comfortably.

Potential Drawbacks of Consumer Proposals

While consumer proposals offer numerous advantages, it is essential to consider the potential drawbacks before proceeding:

Impact on Credit Rating

Filing a consumer proposal will negatively impact an individual’s credit rating, with the notation remaining on their credit report for up to six years from the filing date or three years after completion. This can make it challenging to obtain new credit or secure favorable interest rates during this period.

Creditor Approval Required

For a consumer proposal to be legally binding, it must be accepted by creditors holding at least 50% of the total debt value. While Licensed Insolvency Trustees are skilled negotiators, there is no guarantee that creditors will accept the initial proposal.

Secured Debts Not Included

Consumer proposals only address unsecured debts, such as credit card balances, personal loans, and income tax arrears. Secured debts, like mortgages and car loans, are not included in the proposal and must be addressed separately.

Potential Professional Implications

For individuals in certain professions, such as lawyers, accountants, or real estate agents, filing a consumer proposal may have implications for their professional licenses or designations. It is crucial to consult with the relevant regulatory bodies before proceeding.

The Consumer Proposal Process in Toronto

The consumer proposal process in Toronto typically follows these steps:

  1. Initial Consultation: The first step is to schedule a free, confidential consultation with a Licensed Insolvency Trustee. During this meeting, the trustee will assess the individual’s financial situation, explain the available options, and determine if a consumer proposal is the most appropriate solution.
  2. Proposal Preparation: If a consumer proposal is deemed suitable, the trustee will work with the individual to determine the amount they can afford to pay and the proposed repayment terms. This information will be used to prepare the formal proposal documentation.
  3. Filing and Creditor Notification: The trustee will file the consumer proposal with the Office of the Superintendent of Bankruptcy and notify all creditors of the proposed terms. At this point, the stay of proceedings takes effect, providing immediate relief from creditor actions.
  4. Creditor Voting: Creditors have 45 days to review the proposal and cast their votes. If creditors holding at least 50% of the total debt value approve the proposal, it becomes legally binding on all unsecured creditors.
  5. Court Approval: Once the proposal is accepted by the creditors, a 15-day waiting period allows for any objections from creditors or the Office of the Superintendent of Bankruptcy. If no objections are raised, the proposal is automatically approved by the court.
  6. Proposal Payments: The individual will make periodic payments to the trustee as agreed upon in the proposal terms. The trustee will distribute these funds to the creditors on an annual basis.
  7. Credit Counselling: As part of the process, the individual must attend two mandatory credit counselling sessions to learn effective money management strategies and develop a plan for rebuilding their credit.
  8. Completion and Debt Discharge: Upon fulfilling all the terms of the consumer proposal, the individual will receive a Certificate of Completion, and the remaining unsecured debts included in the proposal will be discharged.

Rebuilding Credit After a Consumer Proposal

While a consumer proposal can provide much-needed debt relief, it is essential to focus on rebuilding credit once the process is complete. Licensed Insolvency Trustees can provide guidance on effective credit-rebuilding strategies, such as obtaining a secured credit card, maintaining timely payments on secured debts, and monitoring credit reports regularly.

Alternatives to Consumer Proposals in Toronto

While consumer proposals offer a viable solution for many Toronto residents, they may not be suitable for everyone. In such cases, Licensed Insolvency Trustees can explore alternative debt relief options, including:

Debt Consolidation Loans

For individuals with a stable income and good credit, a debt consolidation loan may be an option. This involves taking out a new loan to pay off multiple debts, consolidating them into a single monthly payment, often at a lower interest rate.

Credit Counselling and Debt Management Programs

Non-profit credit counselling agencies in Toronto offer debt management programs that can help individuals consolidate their unsecured debts and negotiate reduced interest rates with creditors. While these programs require repayment of the full debt amount, they can provide relief from creditor harassment and a structured repayment plan.


In cases of severe financial distress, bankruptcy may be the most appropriate option. While it carries significant consequences, such as the potential loss of non-exempt assets and a longer-lasting impact on credit, it can provide a fresh start for individuals who are unable to repay their debts through other means.

Seeking Professional Guidance

Navigating the complexities of consumer proposals and other debt relief options can be overwhelming. It is crucial to seek guidance from licensed professionals who can assess your unique financial situation and provide impartial advice tailored to your specific needs.

Licensed Insolvency Trustees in Toronto, such as those at Hoyes Michalos, Spergel, and BDO Debt Solutions, are well-equipped to guide you through the consumer proposal process, ensuring compliance with legal requirements and maximizing your chances of a successful outcome.


For Toronto residents struggling with overwhelming debt, a consumer proposal can offer a lifeline, providing a path towards financial stability and a fresh start. By understanding the process, weighing the pros and cons, and seeking guidance from licensed professionals, individuals can make informed decisions and regain control over their financial future.

Remember, the road to debt relief is not a one-size-fits-all journey. Each individual’s circumstances are unique, and the most effective solution will depend on their specific financial situation, goals, and priorities. By exploring all available options and seeking professional guidance, Toronto residents can navigate the challenges of debt and emerge stronger, more resilient, and better equipped to build a secure financial foundation.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.