Do I Qualify For A Consumer Proposal?

Exploring the Eligibility Criteria for a Consumer Proposal: Your Path to Debt Relief

Do I Qualify For A Consumer Proposal?Navigating the complex world of personal finance can be daunting, especially when faced with overwhelming debt. However, there is a solution that can provide you with a lifeline – the consumer proposal. This legally binding agreement allows you to negotiate with your creditors, potentially reducing the overall amount you owe and establishing a manageable repayment plan.

But the crucial question remains: do you qualify for a consumer proposal? In this comprehensive guide, we’ll delve into the eligibility criteria, the benefits and drawbacks, and the step-by-step process to determine if a consumer proposal is the right debt relief option for your unique financial situation.

Understanding the Basics of a Consumer Proposal

A consumer proposal is a formal, legally binding debt relief solution governed by the Bankruptcy and Insolvency Act of Canada. It allows individuals struggling with unsecured debt to make an offer to their creditors to pay back a portion of what they owe over a specific period, usually up to five years.

The key aspects of a consumer proposal include:

  • Debt Reduction: Creditors are often willing to accept a lower overall amount through a consumer proposal, which means you’ll pay less of the total debt, with the remaining portion being forgiven.
  • Debt Consolidation: A consumer proposal consolidates multiple debts into a single monthly payment, making it easier for you to manage your finances.
  • Asset Protection: Unlike in a bankruptcy, a consumer proposal typically allows individuals to keep their assets, such as their home or car.
  • Legal Protection: Once a consumer proposal is accepted, creditors are legally prevented from taking further action, such as wage garnishments or collection calls.

Eligibility Criteria for a Consumer Proposal

To qualify for a consumer proposal, you must meet the following criteria:

Canadian Residency Requirement

You must be a resident of Canada or have assets located in Canada.

Debt Threshold

There is no specific minimum debt threshold required to file a consumer proposal. However, consumer proposals are typically considered for individuals with unsecured debts of $1,000 or more, and the total debt cannot exceed $250,000 (excluding the mortgage on your principal residence).


You must be insolvent, meaning you are unable to pay your debts as they become due or your debts exceed the value of your assets.

Income and Ability to Make Payments

While there is no specific income requirement, your ability to make the proposed payments will be evaluated. You must have a stable income or means to make the payments outlined in the proposal.

No Prior Open Proposals

You cannot have any prior open proposal proceedings.

It’s important to note that the specific eligibility requirements may vary slightly depending on the province or territory in which you reside. Therefore, it’s recommended to consult with a licensed insolvency trustee to determine if you meet the criteria and to understand the implications of a consumer proposal in your particular situation.

Types of Debts Eligible for a Consumer Proposal

Most unsecured debts can be included in a consumer proposal, such as:

  • Credit card debt
  • Personal loans
  • Lines of credit
  • Payday loans
  • Some tax debts
  • Student loans older than seven years

However, there are certain debts that are not eligible for inclusion in a consumer proposal, including:

  • Child support
  • Alimony
  • Court-ordered fines
  • Student loans under seven years old
  • Secured debts like mortgages and car loans (unless you are willing to surrender the asset)

The Benefits of a Consumer Proposal

Choosing to file a consumer proposal can offer several advantages:

  1. Debt Reduction: Creditors are often willing to accept a lower overall amount, allowing you to pay back a portion of your debts and have the remaining balance forgiven.
  2. Debt Consolidation: By consolidating multiple debts into a single monthly payment, a consumer proposal can make your financial obligations more manageable.
  3. Asset Protection: Unlike in a bankruptcy, a consumer proposal typically allows you to keep your assets, such as your home or vehicle.
  4. Legal Protection: Once a consumer proposal is accepted, creditors are legally prevented from taking further action against you, such as wage garnishments or collection calls.
  5. Structured Payments: Your consumer proposal will outline a customized payment plan based on your financial situation, making it easier to budget and stay on track.

Potential Drawbacks of a Consumer Proposal

While a consumer proposal can be a powerful debt relief solution, it’s important to be aware of the potential drawbacks:

  1. Credit Impact: A consumer proposal will have a temporary negative impact on your credit score. Your credit score will be affected for 3 years after you pay off all the debts included in the proposal, or for 6 years after you sign the proposal (whichever is sooner).
  2. Monthly Payments: Your agreed-upon monthly payments can be challenging if your financial situation doesn’t improve or decreases. It’s crucial to be realistic about what you can afford.
  3. Debt Limit: Consumer proposals have a maximum debt limit of $250,000 (excluding mortgage debt), which may not be suitable for individuals with higher debt levels.

Comparing Consumer Proposals to Other Debt Relief Options

When exploring debt relief solutions, it’s important to understand how a consumer proposal differs from other options:


While both consumer proposals and bankruptcy provide debt relief, the key difference is that a consumer proposal involves a structured repayment plan, whereas bankruptcy may require the liquidation of assets to repay creditors.

Debt Consolidation

Debt consolidation involves combining multiple debts into a single loan with a lower interest rate. In contrast, a consumer proposal doesn’t require a new loan, and the debts included are frozen, with no additional interest accruing.

The Consumer Proposal Process: Step-by-Step

If you’ve determined that a consumer proposal is the right debt relief option for you, the process typically involves the following steps:

  1. Initial Consultation: Meet with a licensed insolvency trustee to review your financial situation and explore your options.
  2. Budget Analysis: The trustee will help you create a budget to determine what you can realistically afford to pay each month.
  3. Debt Review: Your debts will be reviewed to ensure they are eligible for inclusion in the proposal.
  4. Proposal Drafting: Based on your financial assessment, the trustee will help you draft a proposal outlining the amount you can pay and the payment schedule.
  5. Creditor Approval: The proposal is submitted to your creditors, who have 45 days to accept or reject it. If the majority (by dollar value of claims) accept it, the proposal is binding on all creditors.
  6. Filing and Protection: Once filed, the consumer proposal provides legal protection from creditor actions, such as wage garnishments and collection calls.
  7. Adhering to Payments: You must make the agreed-upon payments on time. If you miss three payments, the proposal could be annulled, and you’d lose the protections it provides.
  8. Financial Counseling: You’ll need to attend two financial counseling sessions to help you manage your finances better and avoid future debt problems.
  9. Completion: Upon successful completion of the proposal, you’re legally released from the debts included in the proposal.

Joint Consumer Proposals

If you’re looking to file a proposal with your spouse or partner due to shared debts or a co-signed loan, you may qualify for a joint consumer proposal. To do so, the following criteria must be met:

  • All individuals involved must have mostly or exactly the same debts to pay off.
  • The total debts must be under $500,000 (excluding the mortgage on their principal residence) when two individuals file together.

Filing a Consumer Proposal After Bankruptcy

If you’ve already declared bankruptcy, you can still qualify for a consumer proposal. This can be a beneficial option if your financial situation has changed, and you now have the means to make more manageable monthly payments.

Keep in mind that the date of the consumer proposal will be listed as the same as the bankruptcy, so you cannot add debts incurred during the bankruptcy to the consumer proposal.

Choosing the Right Debt Relief Solution

Navigating the world of debt relief can be overwhelming, but with the guidance of a licensed insolvency trustee, you can find the solution that best fits your unique financial situation. Whether a consumer proposal, bankruptcy, or another option is the right choice, the key is to take the first step and seek professional help.

Remember, you’re not alone in this journey. By exploring your options and understanding the eligibility criteria for a consumer proposal, you’re taking a crucial step towards regaining control of your financial future and achieving the debt-free life you deserve.

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.