What Debts Can a Consumer Proposal Consolidate?

What Debts Can a Consumer Proposal Consolidate

Unleashing the Power of Consumer Proposals: A Comprehensive Debt Consolidation Solution


Grappling with multiple debt burdens can be an overwhelming and daunting experience, leaving individuals feeling trapped in a never-ending cycle of payments and interest charges. However, there is a powerful solution that can provide relief and a path towards financial freedom: the Consumer Proposal. This legal debt consolidation process, facilitated by a Licensed Insolvency Trustee, offers a unique opportunity to streamline your debts, negotiate favorable repayment terms, and potentially reduce your overall debt burden significantly.

Understanding the Consumer Proposal Process

A Consumer Proposal is a legally binding agreement between you and your creditors, facilitated by a Licensed Insolvency Trustee. This professional will assess your financial situation, analyze your debts, and work with you to craft a tailored repayment plan that aligns with your ability to pay. Once the proposal is drafted, your creditors will have the opportunity to vote on its acceptance. If approved, you’ll make consolidated monthly payments to your Licensed Insolvency Trustee, who will distribute the funds among your creditors according to the agreed-upon terms.

The Advantages of a Consumer Proposal

One of the key benefits of a Consumer Proposal is its potential to significantly reduce your overall debt burden. Through negotiations with your creditors, your Licensed Insolvency Trustee may be able to secure a reduction of up to 50-80% or more of your outstanding debts. This can provide substantial relief and a clear path towards becoming debt-free within a specified timeframe, typically ranging from one to five years.

Additionally, a Consumer Proposal offers several other advantages:

  • Consolidated debts are frozen, preventing further interest charges from accumulating.
  • Affordable monthly payments are established based on your financial capabilities.
  • Your Licensed Insolvency Trustee will handle all communications and negotiations with creditors on your behalf.
  • No credit check or additional service fees are required, as no new borrowing is involved.

Debts Eligible for Consolidation

One of the remarkable aspects of a Consumer Proposal is its ability to consolidate and address a wide range of debts, providing a comprehensive solution to your financial challenges. Here are some common types of debts that can be included in a Consumer Proposal:

General Unsecured Debts

Unsecured debts, which are not backed by collateral, are prime candidates for consolidation through a Consumer Proposal. These may include:

  • Credit card balances, overdrafts, and lines of credit
  • Payday loans, personal loans, and debts owed to individuals
  • Overdue utility bills, such as cell phone plans and other services

Government Debts

Remarkably, a Consumer Proposal can also consolidate various types of government debts, including:

  • Personal income tax debts
  • Benefit overpayments (CERB, EI, CPP)
  • Federal and provincial student loans (bank-issued student loans are considered unsecured)
  • Business GST/HST debts

Co-signed and Joint Debts

If you have co-signed or jointly held debts, these can also be included in a Consumer Proposal. However, it’s important to note that any remaining unpaid portion of the debt may still be owed by the co-borrower or joint account holder. Your Licensed Insolvency Trustee can provide guidance on navigating these complexities.

Secured Debts and Asset Retention

Secured debts, such as mortgages and vehicle financing, are tied to specific assets that serve as collateral. In a Consumer Proposal, you have the option to either:

  1. Retain the asset by continuing to make regular payments on the secured debt, while consolidating your other unsecured debts.
  2. Surrender the asset to the creditor, allowing them to take possession. Any remaining balance after the asset’s sale can then be included in your Consumer Proposal for potential reduction.

Exceptions and Special Considerations

While a Consumer Proposal can address a wide range of debts, there are a few exceptions. Debts that cannot be reduced or discharged through a Consumer Proposal include:

  • Court-ordered damages related to bodily harm or sexual assault
  • Child or spousal support arrears
  • Court fines
  • Debts incurred through fraud or misrepresentation

Additionally, government student loans may have specific requirements, such as a waiting period of seven years since you were last a student, before they can be included in a Consumer Proposal. Your Licensed Insolvency Trustee can guide you through these nuances and any applicable hardship provisions.

Comparing Consumer Proposals and Personal Bankruptcy

If a Consumer Proposal is not a viable option due to your inability to make monthly payments, personal bankruptcy may be an alternative path to consider. Both Consumer Proposals and bankruptcy can address similar types of debts, including general consumer debts and government debts. However, bankruptcy typically provides a more immediate fresh start by wiping out virtually all your debts after a brief period, usually nine months, during which you’ll pay an administrative fee.

It’s crucial to carefully evaluate your specific circumstances and seek guidance from a Licensed Insolvency Trustee to determine the most suitable solution for your financial situation.

Consolidation Loans and Bankruptcy

If you have previously obtained a consolidation loan, either secured or unsecured, it can potentially be included in a bankruptcy or Consumer Proposal filing. However, it’s essential to consult with a Licensed Insolvency Trustee to understand the implications and determine the best course of action, particularly if the consolidation loan involves secured assets or co-signers.

The Importance of Professional Guidance

Navigating the complexities of debt consolidation and insolvency solutions can be challenging. That’s why it’s crucial to seek the guidance of a Licensed Insolvency Trustee, who possesses the expertise and legal authority to guide you through the process. These professionals can provide tailored advice, explain your options in detail, and help you make informed decisions that align with your financial goals and circumstances.


If you’re struggling with overwhelming debt, a Consumer Proposal can be a powerful solution to consolidate and potentially reduce your financial burdens. By working with a Licensed Insolvency Trustee, you can explore the possibility of streamlining your debts, negotiating favorable repayment terms, and potentially cutting your debt by a significant amount. With the ability to address a wide range of debts, including government debts and secured obligations, a Consumer Proposal offers a comprehensive path towards regaining control of your finances and achieving long-term financial stability.

Remember, seeking professional guidance is crucial when navigating the complexities of debt consolidation and insolvency solutions. A Licensed Insolvency Trustee can provide the expertise and support you need to make informed decisions and embark on a journey towards a debt-free future.

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