What Debts Will a Consumer Proposal Settle?

A consumer proposal is a debt settlement solution administered by a licensed insolvency trustee.

In essence, the consumer proposal can be compared to a debt consolidation loan as it offers to consolidate an individual’s or a business’s debts in order to deal with a manageable, single monthly repayment.

Unlike a bank-approved loan, the consumer proposal provides a negotiated and affordable amount that the debtor can repay.

As a result, it is a money-saving solution that focuses on negotiating with creditors a smaller amount, reduced interest and reduced payment terms.

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For those who want to find a way out of debt, the consumer proposal is a helpful debt management solution.

However, many people fail to consider a consumer proposal because they are not sure they can use it to consolidate their debts.

Here is a clear and straightforward answer to the question many of our clients have asked, namely:

What debts will my consumer proposal settle?

The good news: Government debts settlement

There are only two types of debt settlement solutions that can settle government debts in Canada.

Both can be administered by a licensed insolvency trustee:



Traditional debt settlement programs or credit counselling services can’t offer any relief for government debts.

Debtors who struggle to keep up payments for liabilities such as their student loans (federal and provincial loans), income taxes, other Canada Revenue Agency payments, source deduction, GST, can use a consumer proposal to settle those debts.

What debts can you write off with a consumer proposal?

The consumer proposal typically focuses on the settlement of most unsecured debts.

The proposal needs to include all your unsecured debts, aka debts that are not protected by a security asset or deposit to the creditor.

These are the following unsecured debts you can cancel with a consumer proposal:


  • Government debts, as mentioned above;
  • Credit card debts; these will be surrendered for cancellation, however, debtors can keep credit cards that have no unpaid balance;
  • Overdraft or line of credit;
  • Payday loans;
  • Private individual or family debt;
  • Relevant business and personal debts;
  • Shortfall for mortgages or vehicle leases;
  • ICBC debts;
  • MSP debts;
  • Student loans that are privately held and not linked to government debts.


Not all debts can be settled

There are specific debts that can’t be settled with a consumer proposal.

Individuals who want to settle their student loan debts will need to ensure it’s been more than 7 years since they were a student.

Debts that have been incurred through court agreements and criminal activities or offences are off-limit.

This will include court fines, court awards for damages regarding bodily harm or sexual assaults, child or spousal support arrears, debt incurred through misrepresentation or fraud.

Can I lose my mortgage if I file a consumer proposal?

Secured loans, such as a mortgage, don’t require debt settlement, as the lender can take possession of the asset if you can’t keep up with the payments.

If you don’t want to carry on with your mortgage payments, you can seize the opportunity to write any shortfall in the proposal.

As a rule of thumb, as long as you maintain your monthly repayment, your mortgage will not be affected by a consumer proposal.

Call 877-879-4770 to discuss how a consumer proposal could help you write off your debts.

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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