What Happens to Your Assets When Filing a Consumer Proposal

What Happens to Your Assets When Filing a Consumer ProposalFacing financial difficulties can be a daunting experience, leaving many Canadians unsure of their options and the impact on their assets. One alternative to personal bankruptcy that has gained popularity in recent years is the consumer proposal. This legal debt settlement process offers a unique opportunity to regain control of your finances while protecting your valuable possessions. In this comprehensive guide, we’ll explore the intricacies of how a consumer proposal affects your assets, providing you with the knowledge to make an informed decision about the best path forward.

Understanding the Basics of a Consumer Proposal

A consumer proposal is a legally binding agreement between you and your creditors, facilitated by a Licensed Insolvency Trustee (LIT). This debt relief solution allows you to negotiate a reduced repayment plan, typically resulting in a significant decrease in the overall amount owed. Unlike bankruptcy, where certain assets may need to be surrendered, a consumer proposal enables you to retain ownership of your property and belongings.

One of the primary advantages of a consumer proposal is the ability to keep your assets, including your home, car, and personal possessions. This makes it a particularly attractive option for Canadians who wish to maintain financial stability and avoid the more severe consequences associated with bankruptcy.

Protecting Your Home

When it comes to your most valuable asset – your home – a consumer proposal offers a unique level of protection. As long as you can continue making your regular mortgage payments and the agreed-upon monthly consumer proposal payments, your lender cannot take action to change the terms of your mortgage or repossess your property.

This is a significant benefit compared to bankruptcy, where your home may be at risk of being sold to repay your debts. With a consumer proposal, you can rest assured that your family’s residence will remain yours, allowing you to focus on regaining financial stability without the added stress of potentially losing your home.

Keeping Your Vehicle

Similar to the treatment of your home, a consumer proposal also allows you to retain ownership of your vehicles, regardless of their value. This is in contrast to bankruptcy, where you may only be able to keep one vehicle that falls within the provincial exemption limits.

As long as you can maintain the monthly payments on any outstanding car loans or leases, as well as your consumer proposal payments, your vehicle will remain in your possession. This provides you with the continued ability to commute to work, transport your family, and maintain your independence during the debt repayment process.

Preserving Personal Possessions

One of the most significant advantages of a consumer proposal is the protection it offers for your personal belongings and valuables. Unlike in a bankruptcy scenario, where your creditors may have a claim on your assets, a consumer proposal ensures that your personal possessions remain your own.

This includes items such as jewelry, antiques, artwork, and other valuable belongings. While you may choose to sell certain high-value assets to contribute towards your consumer proposal payments, the decision ultimately rests with you. Your Licensed Insolvency Trustee will work with you to develop a fair and reasonable repayment plan that takes into account your unique financial situation and asset ownership.

Safeguarding Registered Savings and Investments

When it comes to your registered savings plans, such as RRSPs and RESPs, a consumer proposal offers a distinct advantage over bankruptcy. In a consumer proposal, these assets remain under your control and are not subject to seizure by your creditors.

This means that you can continue contributing to your retirement savings and your children’s education funds without the risk of having to surrender these valuable assets. This can provide a significant boost to your long-term financial security and help you maintain a sense of stability during the debt repayment process.

Handling Tax Refunds and Government Benefits

Another area where a consumer proposal differs from bankruptcy is the treatment of tax refunds and government benefits. When you file a consumer proposal, you continue to file your tax returns as usual, and any resulting refunds will be reviewed against any outstanding balance you have with the Canada Revenue Agency (CRA).

If you have a balance owing, the CRA will apply the pre-proposal portion of the refund to your tax debt, and the remaining amount will be sent to you. If you do not owe the CRA, you will receive the full refund. This same scenario applies to GST rebates and other government benefits, ensuring that you can continue to access these funds during the consumer proposal process.

The Consumer Proposal Process

Initiating a consumer proposal is a straightforward process that must be facilitated by a Licensed Insolvency Trustee (LIT), the only professionals in Canada legally authorized to administer all forms of debt relief. Here’s a general overview of the steps involved:

  1. Initial Consultation: You’ll meet with an LIT to discuss your financial situation, explore your options, and determine if a consumer proposal is the best solution for your needs.
  2. Proposal Preparation: Your LIT will work with you to create a personalized consumer proposal, outlining the terms of the repayment plan and the protection of your assets.
  3. Creditor Approval: Your LIT will submit the consumer proposal to your creditors, who must approve the plan by a majority vote (in terms of the dollar value of the debt).
  4. Implementation: Once the consumer proposal is accepted, you’ll begin making the agreed-upon monthly payments to your LIT, who will then distribute the funds to your creditors.
  5. Completion: After successfully completing the consumer proposal (typically within 5 years), you’ll be debt-free, and your assets will remain fully intact.

Building a Brighter Financial Future

While a consumer proposal may have a temporary impact on your credit score, it presents a unique opportunity to regain control of your finances and protect your valuable assets. By working with a Licensed Insolvency Trustee, you can develop a personalized debt relief plan that allows you to keep your home, car, and personal belongings, while also rebuilding your credit over time.

The flexibility and customization offered by a consumer proposal make it an attractive alternative to personal bankruptcy, empowering you to navigate the road to financial freedom without sacrificing your most prized possessions. With the right guidance and a steadfast commitment to your repayment plan, a consumer proposal can be the key to a brighter, more secure financial future.


In the face of overwhelming debt, the consumer proposal offers Canadians a lifeline that preserves their assets and provides a pathway to financial stability. By understanding the unique protections afforded to your home, vehicle, personal possessions, and registered savings, you can make an informed decision about the best course of action for your situation.

Remember, the journey to debt freedom is not about what you have to give up, but rather about stabilizing your finances and securing a fresh start. With the support of a Licensed Insolvency Trustee, you can navigate the complexities of a consumer proposal and emerge stronger, more resilient, and in control of your financial future.

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