Debt solution

Consumer proposal

A government-regulated way to legally settle your unsecured debts by repaying only a portion of what you owe, over up to five years.

Generally for people who are insolvent, with unsecured debts over $1,000 and under $250,000 excluding a mortgage on their principal residence.

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What a consumer proposal is

A consumer proposal is a government-regulated debt solution in Canada that lets you legally settle your unsecured debts by repaying only a portion of what you owe over time. It is a formal, legally binding agreement filed by a Licensed Insolvency Trustee under the Bankruptcy and Insolvency Act, and it is often used as an alternative to bankruptcy.

In most cases a consumer proposal lets you reduce your total unsecured debt and spread affordable payments over up to five years, while keeping your assets as long as you maintain payments on secured loans like your mortgage or car loan.

Collection calls, wage garnishments and most legal actions stop once the proposal is filed and accepted by your creditors.

It is a legal process, not a negotiation service

Because a proposal is filed under federal law, the outcome binds every included creditor once the required majority approves it. That is what separates it from an informal arrangement, and it is also why only a licensed professional can file one.

Who can file a consumer proposal

Consumer proposals are designed for individuals who are insolvent, meaning they can no longer keep up with their debt payments, or their total debts are greater than the value of their assets.

This is a general guide, not a determination. Only a Licensed Insolvency Trustee can confirm whether you qualify and file on your behalf.

  • You are insolvent: you cannot keep up with your debt payments, or your debts exceed the value of your assets.
  • Your unsecured debts, excluding a mortgage on your principal residence, are generally more than $1,000 and less than $250,000.
  • You are a Canadian resident, or you own property in Canada.
  • You have a reasonably stable income that can support a fixed monthly payment for the term of the proposal.
  • Incorporated businesses cannot file a consumer proposal, but may be able to use a separate Division 1 proposal instead.
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How a consumer proposal works

A proposal restructures your debt into a single reduced payment plan, negotiated with your creditors by a Licensed Insolvency Trustee.

  1. 01

    Consultation with a Licensed Insolvency Trustee

    An LIT reviews your income, debts, assets and budget, then confirms whether a consumer proposal is appropriate or whether another option, such as bankruptcy or consolidation, would serve you better.

  2. 02

    Designing your proposal

    Together you determine an affordable monthly payment and an overall settlement amount, often between 30% and 70% of what you currently owe, depending on your situation and what your creditors will accept.

  3. 03

    Filing and creditor voting

    The trustee files your proposal with the Office of the Superintendent of Bankruptcy and notifies your creditors, triggering a legal stay of proceedings. Creditors then have a set period to accept or reject. If the majority by dollar value approve, it becomes binding on all included creditors.

  4. 04

    Fixed payments and counselling

    Once approved you make fixed monthly payments, usually over three to five years, with no penalty for paying it off early. You also complete two financial-counselling sessions on budgeting, credit and avoiding future debt problems.

  5. 05

    Completion and discharge

    After you make all required payments, the remaining unpaid portion of the included unsecured debts is legally discharged and you are no longer responsible for those balances.

Advantages and trade-offs

Like any major financial decision, a consumer proposal has real benefits and real costs. Both belong in the same view.

Advantages

  • Reduces the total amount of unsecured debt you must repay, often significantly.
  • Lets you keep your home, vehicle and other assets, provided you maintain secured payments.
  • Stops collection calls, lawsuits and wage garnishments once filed and accepted.
  • Gives you one affordable monthly payment, with no interest and no penalty for early payoff.

Trade-offs

  • Requires a stable enough income to maintain fixed payments for up to five years.
  • Stays on your credit report for several years, limiting access to new credit and raising interest rates.
  • Only deals with unsecured debts. Secured debts like mortgages and car loans are not included.
  • If you miss too many payments and the proposal is annulled, creditors can resume collections and bankruptcy may become the remaining option.

Because the trade-offs are significant, it is worth comparing a consumer proposal against every available option before you commit.

How Wizdom Financial helps

You cannot file a consumer proposal on your own. Only a Licensed Insolvency Trustee can submit one on your behalf. Wizdom Financial works alongside you and the trustee so the proposal is built around your real budget and your longer-term goals.

We start with a complete review of your income, debts and assets to determine whether a consumer proposal is the best fit, or whether consolidation, credit counselling or bankruptcy would make more sense. We stress-test different payment scenarios so you can see how each option affects your cash flow over time.

The aim is the path that balances debt relief, asset protection and long-term recovery, not simply the lowest short-term payment.

Because proposal payments are fixed, getting the amount right at the start is critical. We help you:

  • Build a detailed monthly budget that reflects your actual living costs
  • Determine what payment level is genuinely sustainable over three to five years
  • Model different settlement percentages to understand how changing the offer affects both your creditors and your cash flow

With that groundwork, your trustee can file a proposal that is both attractive to creditors and realistically affordable for you.

We connect you with a reputable Licensed Insolvency Trustee and prepare you for that meeting, so you know what to expect and what to ask. We help you gather documents, clarify your objectives, and translate trustee explanations into clear next steps.

The trustee handles every formal step, including filing, negotiating with creditors and obtaining approval. Wizdom Financial remains your consistent point of contact throughout.

Once accepted, the hard part is staying consistent for the full term. We support you by:

  • Fine-tuning your budget as your income or expenses change
  • Planning for annual costs like property taxes, insurance or back-to-school without missing a payment
  • Setting up simple systems such as automatic transfers and separate savings buckets

This reduces the risk of default, so you complete the proposal and receive your discharge as planned.

When the final payment is made, the remaining covered debts are legally discharged and rebuilding begins. We continue working with you to:

  • Rebuild credit with carefully chosen tools and strong habits
  • Redirect the cash flow that went into the proposal into emergency savings and longer-term goals
  • Plan major decisions around housing, vehicles, education and retirement from your new starting point

How this differs from the other two

A proposal sits between full repayment and full discharge. Here is where the other two routes differ.

Bankruptcy

Eliminates most unsecured debt rather than reducing it, and is usually faster. Non-exempt assets may be surrendered, and payments can rise with your income under surplus-income rules.

How bankruptcy works

Orderly Payment of Debts

Repays your unsecured debt in full at a fixed low interest rate instead of writing part of it off. Lighter on your credit, but only available in four provinces.

How OPD works
See the full comparison

Consumer proposal questions

Settlements commonly land between 30% and 70% of what you owe, depending on your situation and what your creditors will accept. Because creditors vote on the proposal, nobody can promise a figure in advance. We model several scenarios with you before anything is filed.

No. Consumer proposal payments are fixed for the life of the proposal and do not change if your income increases. That is one of the clearest differences from bankruptcy, where surplus-income rules can raise your payments.

Yes. There is no penalty for paying a consumer proposal off early, and doing so ends the process sooner.

Missing too many payments can cause the proposal to be annulled, at which point creditors can resume collection action and bankruptcy may become the remaining option. This is exactly why we spend time getting the payment amount right at the start, and why we keep supporting you through the term.

A completed consumer proposal is generally reported at a lower severity than bankruptcy and remains on your credit report for several years after completion. It does limit access to new credit during that period.

Find out where you actually stand

A free 30-minute conversation, no obligation. We will tell you plainly whether a proposal fits, or whether something else would serve you better.

Book a Free Consultation

Mon to Fri 8:00am to 8:30pm, and Saturdays