What is the Debt Limit for a Consumer Proposal?

Understanding Consumer Proposals and Their Debt Limits

Being in debt can be overwhelming, and finding the right solutions to manage it is crucial. If you’re considering filing a consumer proposal in Canada, it’s important to understand its intricacies, including its debt limits. So, what is the debt limit for a consumer proposal? Let’s delve into the details and understand how it works.

What is a Consumer Proposal?

A consumer proposal is a legally binding agreement, facilitated by a Licensed Insolvency Trustee (LIT), where you agree to pay creditors a percentage of what you owe them over a certain period (usually up to five years), interest-free. It’s an alternative to bankruptcy and can be a viable solution if you’re unable to maintain the minimum monthly payments and interest charges on your debts.

The specifics of a consumer proposal are governed by Canada’s Bankruptcy and Insolvency Act (BIA), which outlines debt solutions for individuals and mandates the rules and regulations surrounding these options.

Before filing a consumer proposal, ensure you meet its eligibility criteria, including the debt limit. Consulting an LIT can help you understand if a consumer proposal is your best option.

The Consumer Proposal Debt Limit

One of the primary eligibility criteria for a consumer proposal is the debt limit. Effective from September 18, 2009, a consumer proposal can be filed by an individual whose total debt, excluding the mortgage on their principal residence, is less than $250,000.

Calculating Your Debts for Eligibility

To check if your debts qualify you for a consumer proposal, list all your debts and total the balances owing. This list should include all types of debts. Subtract the amount owing for your principal residence’s mortgage from the total. If the remaining amount is less than $250,000, you can consider a consumer proposal. However, your income, expenses, and other factors can influence your eligibility.

Joint Consumer Proposals and Their Debt Limit

If you’re considering filing a joint consumer proposal with your spouse, the combined debt limit should be less than $500,000. This calculation includes all debts, whether jointly held or individually owned, excluding the mortgage on your principal residence.

An LIT can guide you on whether a joint consumer proposal is feasible or if separate proposals are necessary.

Inclusions and Exclusions in the Debt Limit

Certain debts might not benefit from the consumer proposal payments, especially if they’re secured to an asset and you’re maintaining the payments, like a car loan. However, for determining your eligibility for a consumer proposal, all your debts, including these, must be included.

Only the mortgage on your principal residence is excluded from the total debt calculation. Mortgages on other properties are added to the total consumer debts.

Overstepping the Proposal Debt Limit

If your total debt exceeds the consumer proposal limit, you can’t file a consumer proposal. However, you can still propose to your creditors under the Bankruptcy & Insolvency Act via a Division I proposal.

A Division I proposal is similar to a consumer proposal for the consumer, but its administration is more complicated and has different statutory deadlines and obligations for the Trustee.

Seeking Professional Help

Determining whether you qualify for a consumer proposal or a Division I proposal involves more than understanding the debt limit. Consulting a Licensed Insolvency Trustee, who is legally able to help you with a consumer proposal or other debt solutions, is recommended. They can assist you in weighing the pros and cons of a consumer proposal and guide you through the entire process.


Being in debt can be challenging, but understanding the solutions available to you can make the journey less daunting. A consumer proposal could be a viable solution for you if you’re struggling to manage your debts, but it’s important to understand the specifics, including the debt limit, before making a decision.

Remember that professional help is available. A Licensed Insolvency Trustee can provide you with the guidance you need to navigate your financial situation and help you make the most informed decision.

Understanding ‘what is the debt limit for a consumer proposal?’ is just the first step. There’s a lot more to consider, and every individual’s situation is unique. Don’t hesitate to seek professional advice to ensure that you’re making the best decisions for your financial future.

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