What Debts Can be Consolidated in a Consumer Proposal?

Understanding the Scope of a Consumer Proposal in Debt Consolidation

In the complex world of financial management, understanding the purpose and effectiveness of different strategies is crucial. One such strategy that is often misunderstood is the Consumer Proposal. This article aims to shed light on the question: What debts can be consolidated in a Consumer Proposal?

The Basics of a Consumer Proposal

A Consumer Proposal is a legal agreement set up by a Licensed Insolvency Trustee (LIT) between you and your creditors. It involves making an offer to pay creditors a percentage of what is owed to them or extend the time you have to pay off the debts, or both.

This debt relief option is especially beneficial for those dealing with substantial unsecured debt. But what types of debt can be consolidated into a Consumer Proposal? Let’s delve deeper into this topic.

Types of Debts Included in a Consumer Proposal

A Consumer Proposal is a versatile tool when it comes to debt consolidation. It can encompass a variety of both consumer and business-related debts.

Consumer Debts

  1. Credit Card Debt: This is one of the most common forms of debt, and it can be easily consolidated into a Consumer Proposal.
  2. Overdrafts and Lines of Credit: Overdrafts or lines of credit from financial institutions can also be included.
  3. Payday Loans: High-interest payday loans are eligible for consolidation under a Consumer Proposal.

Government Debts

Government-related debts are also eligible for consolidation in a Consumer Proposal, making it a distinctive debt solution. These can include:

  1. Income Taxes and GST: Outstanding balances owed to the Canada Revenue Agency (CRA) can be included in the proposal.
  2. Source Deductions: These are amounts an employer withholds from an employee’s pay for CPP, EI, and income tax.
  3. Student Loans: Both provincial and federal student loans can be included, along with privately held student loans.

Business Debts

In the case of business owners, certain business-related debts can be consolidated in a Consumer Proposal:

  1. ICBC Debt and MSP Debt: These are specific to British Columbia but can be included in a Consumer Proposal.
  2. Private Individual and Family Debts: Money borrowed from friends or family for business purposes can also be included.

Debts Exempt from a Consumer Proposal

While a Consumer Proposal can cover a wide range of debt types, there are specific debts that it cannot resolve. These include:

  1. Court-ordered fines or penalties
  2. Child or spousal support arrears
  3. Debts arising from fraudulent activities
  4. Student loans, if you have been a student within the last seven years

The Impact of a Consumer Proposal on Mortgages

An essential question for homeowners is whether a Consumer Proposal will affect their mortgage. The good news is that Consumer Proposals typically do not impact mortgages or vehicle financing agreements. These are considered secured debts, and as long as you continue to make payments, your assets are safe.

The Process of Filing a Consumer Proposal

You first need to consult with a Licensed Insolvency Trustee, who will assess your financial situation and determine if a Consumer Proposal is the right solution for you. Once the proposal is prepared, it is filed with the Office of the Superintendent of Bankruptcy, and all creditor actions are stopped.

The Benefits of a Consumer Proposal

The main advantage of a Consumer Proposal is that it provides a legal and structured means of consolidating and reducing your debt. It also offers flexibility, allowing you to retain assets like your home and car while you pay down your debt.


A Consumer Proposal is a powerful tool in managing and reducing debt. By understanding What Debts Can be Consolidated in a Consumer Proposal?, you can make an informed decision about whether it’s the right strategy for you.

If you’re struggling with debt and considering a Consumer Proposal, reach out to a Licensed Insolvency Trustee for a free consultation. They can provide expert advice tailored to your unique financial situation and help you on your path to financial freedom.

Remember, every financial situation is unique, and what worked for someone else may not work for you. Always seek professional advice before making any major financial decisions.

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