How a Consumer Proposal May Benefit You And Your Creditors

Consumer Proposals Benefit The Debtor & The Creditors

Are you struggling with piling debts, and the pressure from relentless creditors is becoming unbearable? Yet, you are hesitant to file for Bankruptcy because of its severe implications? If this scenario sounds familiar, a Consumer Proposal might be the solution you need. This article explores the concept of a Consumer Proposal and how it might benefit you and your creditors.

Understanding Consumer Proposal

A Consumer Proposal is an agreement drafted by you and a Licensed Insolvency Trustee (LIT) and submitted to your creditors. It aims to adjust the terms of your debt repayment, which could mean reducing the amount you owe, extending your repayment period, or even eradicating fees and charges. The stipulation, however, is that the agreed payments must be completed within a specified timeframe, typically no more than five years.

Role of a Licensed Insolvency Trustee (LIT)

A Licensed Insolvency Trustee (LIT) is a professional licensed by the federal government to administer Consumer Proposals and Bankruptcies. Only through an LIT can a Consumer Proposal be filed. They play a critical role in drafting the proposal and presenting it to your creditors for approval. Creditors are usually more open to accepting a Consumer Proposal over Bankruptcy because it ensures they recover a higher portion of the debt owed to them.

How Consumer Proposal Benefits You

There are several advantages of filing a Consumer Proposal for individuals grappling with unmanageable debts but are reluctant to file for Bankruptcy. Let’s explore some of these benefits:

  • Preservation of Assets: A Consumer Proposal allows you to retain all your belongings, unlike Bankruptcy, where you might have to surrender some non-exempt assets. In a Consumer Proposal, the value of assets that would have been forfeited in Bankruptcy must be included in the amount you pay to your creditors, but there is no requirement to give them up.
  • Halting Collection Activities: One of the biggest stressors of being in debt is the persistent calls and letters from creditors. However, once a Consumer Proposal is filed, all collection activities against you must cease, as per the law. This means an end to phone calls, letters, wage garnishments, and more. As long as you adhere to the payment agreement in your proposal, you are protected from these collection activities.
  • Partial Debt Repayment: A Consumer Proposal enables you to repay a part of your debts, not the entire amount owed. Once all the agreed-upon payments are completed, your entire debt is eliminated.
  • No Income Reporting: Unlike Bankruptcy, where you must report your income and expenses monthly, a Consumer Proposal doesn’t require this. You only have to make the agreed-upon monthly payments, irrespective of any changes in your income.
  • Flexibility: A Consumer Proposal allows you to pay off your debt sooner if your circumstances improve, shortening the amount of time it stays on your credit report.

How a Consumer Proposal Benefits Creditors

It’s not just debtors who stand to benefit from a Consumer Proposal; creditors do too. Here’s how:

  • Higher Debt Recovery: Compared to other debt relief options like Bankruptcy, a Consumer Proposal allows creditors to recover a larger portion of the debt owed.
  • Fixed Repayment Schedule: A Consumer Proposal sets a clear repayment schedule, allowing creditors to receive regular payments over a defined timeframe.
  • Lower Risk of Asset Liquidation: Since a Consumer Proposal allows debtors to keep their assets, creditors can avoid the lengthy and costly process of asset liquidation.

The Process of Filing a Consumer Proposal

After your initial meeting with a Licensed Insolvency Trustee (LIT), they will discuss all available debt relief options with you. If a Consumer Proposal is deemed the best choice, the LIT will negotiate with your creditors, file the proposal on your behalf, and guide you through each step of the process.

What Happens Post Filing a Consumer Proposal?

Once your Consumer Proposal is accepted by the creditors, you must make all agreed-upon payments, either as regular monthly payments or lump-sum payments over a defined period. You are also required to attend two counselling sessions to discuss budgeting and strategies for restoring your credit rating. Upon completion of these requirements, you are released from all the unsecured debts you owed at the time you filed the Consumer Proposal.


If your debts are overwhelming your finances, a Consumer Proposal could be an excellent option for getting back on track. A Licensed Insolvency Trustee can help you assess all your options, including a Consumer Proposal, so you can decide if it’s the right choice for you.

Get a Free Consultation!

Contact us for a free consultation to see how we can assist you in resolving your debt.

Click here to schedule an appointment for your free consultation.

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.