Is a Consumer Proposal Worth it?

Should I File a Consumer Proposal?

If you are one of the growing number of Canadians currently struggling to make ends meet or satisfy debt repayment agreements, it’s vital that you take control of the situation ASAP.

When researching debt relief strategies that allow you to escape the threat of bankruptcy, the concept of a Consumer Proposal is likely to feature prominently.

Before jumping in at the deep end, though, you must first learn to familiarize yourself with the finer details to decipher whether it’s the right solution for you.

Here’s everything you need to know.

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Consumer Proposals Explained

A Consumer Proposal is a legal agreement that is facilitated by a Licensed Insolvency Trustee to help you settle your debts in a faster and more affordable manner.

It enables you to become discharged from liability without resorting to bankruptcy filing while saving you up to 80% on your debt repayments.

Better still, it is a procedure that stops the threat of any legal action to lift a weight from your shoulders.

Consumer Proposals are filed under the Bankruptcy and Insolvency Act while they work on the concept of negotiating a new repayment plan at a lower cost.

It legally releases you from a wide range of unsecured debt sources, including but not limited to:


  • Credit card debt;
  • Bank loans and overdraft interest;
  • Payday loans and personal loans;
  • Utility bills, including cell phones;
  • Lines of credit.


The Consumer Proposal relies heavily on the Trustee’s ability to negotiate a better repayment plan in which you pay back less money.

Creditors are often willing to accept the new deal because it is better for them to receive some payment than write off the entire debt, which would happen if you file for bankruptcy or if the debt is close to becoming an old debt.

If over 50% of the creditors agree to the Consumer Proposal, all others are legally obliged to accept it too.

It should be noted, however, that the 50% figure relates to the financial value rather than the number of creditors.

So, if you owe $20,000 across 16 creditors, you need $10,000 of the debt to be negotiated rather than eight individual creditors.

The Benefits Of Consumer Proposals

Consumer Proposals are an attractive alternative to filing for bankruptcy in Canada.

In fact, it has become a noticeable trend among the 125,000 or so Canadians that seriously consider bankruptcy each year.

While there are several financial repercussions that must be taken into account, the plethora of benefits make it clear to see why many people take this route.

Some of the most telling incentives for embracing Consumer Proposals are:


  • Put an instant end to collection agency calls and the threat of legal action;
  • Clear all interest on every account covered by the Consumer Proposal;
  • Reduce the value of each debt to secure a huge overall saving;
  • Extend the repayment plan to a period of up to five years;
  • Consolidate multiple debts into one monthly repayment for easier management;
  • Keep hold of assets, such as your home or vehicle.


In addition to the above benefits, the negative impacts on your financial future are far smaller than when filing for bankruptcy.

There is no undischarged bankruptcy period to worry about.

Similarly, Consumer Proposals only appear on your credit history for three years, unlike the six-year period hit by bankruptcy.

When your debts are out of control, but you can afford to pay something back, Consumer Proposals are often the ideal solution.

The Downsides Of Consumer Proposals

Consumer Proposals are almost universally agreed to offer a better alternative to declaring yourself bankrupt.

However, it’s important to take the potential drawbacks into account too.

Aside from the fact that the agreement appears on your credit for two years after the debts have been cleared, there are several additional issues to consider.

They include:


  • Consumer Proposals only clear unsecured debts. Secured loans and agreements will still need to be repaid in full with interest;
  • The process can take some time as the Trustee needs to negotiate terms with creditors until an agreement is met, which can take 45 days;
  • If you default on the new repayment terms, severe financial repercussions can follow, leading to long-term problems;
  • Student loans are not included unless you finished your studies at least seven years ago.


A Consumer Proposal does have limitations, not least if your debt is primarily rooted by secured debt.

However, the benefits often outweigh the negatives, especially for those that wish to start repairing their financial health ASAP.

The Consumer Proposals Process

The Consumer Proposal procedure isn’t as daunting as personal bankruptcy filing.

However, it is still a serious financial process that must be completed in the correct fashion.

Otherwise, you could encounter significant delays or potentially land yourself in a worse situation than before.

If it is deemed the best path for your requirements, partnering with a trusted and experienced Trustee is crucial.

When working with a Licensed Insolvency Trustee, like our experts at Bankruptcy Canada, the following process is expected:


  • An initial consultation and financial audit is used to gain a deeper understanding of your financial situation, such as the type of debts you have. This is a chance to analyze the merits of a Consumer Proposal in line with your objectives, and to consider other debt relief programs;
  • The Consumer Proposal is developed and submitted to the Office of the Superintendent of Bankruptcy (OSB) before heading on to the creditors. This is accompanied by a report on your personal finances that is subsequently used to encourage creditors to accept;
  • All legal actions and collection calls are ended while several stages of negotiation until you surpass the 50% threshold may follow. This has to occur with the aforementioned 45-day period. Once accepted, the Trustee will organize the date of repayment commencement.


Once the repayment cycle has started, you will make the monthly repayments as scheduled.

These are then distributed proportionately to the creditors until all of your accounts have been cleared.

As a legally binding agreement, creditors are unable to change their minds or attempt to secure a bigger repayment.

It is a potentially complicated process when multiple creditors are involved, especially as a wide range of personal issues must be taken into account.

Therefore, it’s imperative that you partner with a transparent and accessible Trustee at all times, not least because a Credit Counselor is not permitted to file a Consumer Proposal anyway.

Bankruptcy Canada’s dedicated experts can guide you through the process.

Are You A Suitable Candidate?

On the face of it, a Consumer Proposal may sound like the perfect buoyancy aid for anyone currently drowning under a wave of debt.

However, as with any significant financial agreement, you must take the responsible approach by viewing the entire picture.

In addition to knowing whether it is right for you, it’s important to check that you are suitable for it.

While all individual circumstances are judged on their own merits, the following criteria will form the bulk of the decision-making process:


  • The value of your assets should be greater than your debts;
  • The debts (excluding secured debts like mortgages) should be less than $250,000;
  • It should be clear that you are capable of making the monthly repayments.


Other factors that can impact the situation include whether you’ve previously filed for bankruptcy, whether you are willing to attend financial counseling sessions and the level of your income.

Even if you are suited to a Consumer Proposal, your fate will depend on the negotiation features.

In some cases, creditors will arrange a meeting (this should be done within 21 days of submitting the Consumer Proposal) to discuss the situation.

In most cases, though, this is not required.

If the 45-day period surpasses without the request of a meeting, the proposal is accepted by default.

Is A Consumer Proposal Right For You?

The short answer is that there is no single right or wrong answer to this question.

Ultimately, it’ll be necessary to weigh up the pros and cons of Consumer Proposals against your current situation, as well as the long-term objectives.

Nonetheless, it is usually seen as a better solution than many alternative options, including debt settlement agencies.

A Consumer Proposal is likely to be the right choice when:


  • Your debts are large, but not extortionate;
  • You can afford to make a reduced monthly payment;
  • The unsecured debts outweigh secured debts;
  • You have assets that you wish to keep;
  • Short-term financial limitations won’t spell disaster.


It is additionally a good option for anyone worried about the impact that a bankruptcy hearing could have on their future career prospects.

Nonetheless, it’s important to analyze every aspect of the proposed debt relief strategy with an experienced Licensed Insolvency Trustee that can help you understand the full situation and prepare your submission in style.

Bankruptcy Canada’s free, no-obligation consultations cover a wide range of topics, including Consumer Proposals.

To find out more about how it will impact your financial future over the years to come, or to prepare your agreement with creditors, give us a call on (877) 879-4770 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

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