How to Qualify for a Consumer Proposal in Canada (2026)

If you’re struggling with debt and wondering whether there’s a way out that doesn’t involve bankruptcy, a consumer proposal might be exactly what you need. It’s one of the most popular debt relief options in Canada, and for good reason — it lets you settle your unsecured debts for less than you owe while keeping your home, your car, and your dignity.

But not everyone qualifies. Before you get your hopes up, it helps to understand the specific eligibility requirements so you know where you stand. The good news? The bar is lower than most people think, and if you’re reading this, there’s a solid chance you already meet the criteria.

What Is a Consumer Proposal?

A consumer proposal is a formal, legally binding agreement between you and your creditors. It’s administered by a Licensed Insolvency Trustee and governed by the Bankruptcy and Insolvency Act (BIA). According to the Office of the Superintendent of Bankruptcy Canada, a consumer proposal allows you to repay a portion of your unsecured debt — typically between 20% and 50% — over a period of up to five years.

Unlike informal debt settlement, a consumer proposal has real legal teeth. Once your creditors accept it (or a court approves it), collection calls stop, wage garnishments end, and interest freezes. It’s the most common insolvency filing in Canada, outpacing personal bankruptcy by a wide margin.

The key difference from bankruptcy is that you keep your assets. Your house, your vehicle, your RRSP — they stay with you. That’s why many Canadians prefer a consumer proposal when they’re weighing their debt relief options.

Eligibility Requirements for a Consumer Proposal

The eligibility criteria are set out in the BIA and are fairly straightforward. Here’s what you need to meet:

1. Your unsecured debt must be between $1,000 and $250,000

This is the most important threshold. Your total unsecured debts — credit cards, personal loans, lines of credit, payday loans, tax debts, and medical bills — must not exceed $250,000. Your mortgage on your primary residence is excluded from this calculation. If your unsecured debts exceed $250,000, you may still be able to file a Division I Proposal, which works similarly but has different rules.

2. You must be insolvent (unable to pay debts as they come due)

You don’t have to be broke to qualify. Insolvency simply means your debts have become unmanageable — you can’t keep up with the minimum payments, or your total debts exceed the value of your assets. If you’re falling behind on bills, borrowing to pay off other debts, or getting calls from collectors, you likely meet this requirement.

3. You need a source of income

Consumer proposals require you to make regular monthly payments over the term of the agreement (up to 60 months). That means you need some form of steady income — whether from employment, self-employment, a pension, or government benefits. The amount you pay is based on what you can reasonably afford, not a fixed percentage of your debt.

4. You must be a Canadian resident (or have ties to Canada)

To file a consumer proposal, you must either live in Canada, own property in Canada, or conduct business in Canada. This is a jurisdictional requirement under the BIA that ensures Canadian courts can oversee the process.

5. You cannot currently be bankrupt

If you’re in the middle of an active bankruptcy, you cannot file a consumer proposal at the same time. However, if you’ve been discharged from a previous bankruptcy, you’re free to file one. Some people even convert an existing bankruptcy into a consumer proposal — your LIT can advise you on whether that’s possible in your situation.

Pros of Filing a Consumer Proposal

Cons to Consider

Who Should Consider a Consumer Proposal

Who Should NOT File a Consumer Proposal

What a Consumer Proposal Looks Like in Practice

Here’s a realistic example of how a consumer proposal can reduce your debt burden. Let’s say you owe $45,000 across multiple unsecured debts:

In a consumer proposal, your LIT might negotiate a settlement of $18,000 — that’s 40 cents on the dollar. Paid over 60 months, your monthly payment would be just $300/month with zero interest. Compare that to the $1,200+ per month you might be paying in minimum payments right now, plus interest that never seems to shrink.

Steps to File a Consumer Proposal

1. Book a free consultation with a Licensed Insolvency Trustee. Only an LIT can file a consumer proposal — not a debt consultant, not a credit counsellor, and not a lawyer. The initial consultation is always free and confidential. You can request a free consultation here.
2. Gather your financial information. Bring a full picture of your finances: a list of all debts, your monthly income and expenses, and any assets you own. Your LIT will review everything to confirm you qualify.
3. Your LIT designs a proposal your creditors will accept. Based on your income and what you can afford, the LIT drafts a proposal offering your creditors a percentage of what you owe. Experienced LITs know what creditors typically accept, so they’ll aim for a deal that works for everyone.
4. The proposal is filed and creditors vote. Once filed, creditors have 45 days to vote. A majority by dollar value must approve it. In practice, most consumer proposals are accepted — the acceptance rate in Canada is very high because creditors know they’ll get more than they would in a bankruptcy.
5. You make your monthly payments and attend two counselling sessions. Once accepted, you simply make your agreed payments each month. You’ll also complete two mandatory financial counselling sessions, which many people find genuinely helpful for building better money habits.
6. Receive your Certificate of Full Performance. After completing all payments, you receive a certificate confirming your debts are legally settled. The R7 notation drops off your credit report 3 years later, and you’re free to rebuild with a clean slate.