If you’ve searched for “consumer proposal guidelines” hoping for a plain-English rundown of who qualifies, what the rules are, and how the process actually unfolds, this guide is for you. In Canada, consumer proposals aren’t governed by a company or an international body — they’re a formal debt relief tool set out in the federal Bankruptcy and Insolvency Act (BIA) and overseen by the Office of the Superintendent of Bankruptcy (OSB).
The guidelines matter because they decide who can file, how long a proposal lasts, what creditors must do, and what happens if something goes sideways. Below, we’ll walk through the rules the way a Licensed Insolvency Trustee would explain them at a kitchen table — without the legal fog.
What Are Consumer Proposal Guidelines?
A consumer proposal is a formal, legally binding process administered by a Licensed Insolvency Trustee (LIT) — a federally regulated debt professional. The “guidelines” come straight from the Bankruptcy and Insolvency Act (sections 66.11 through 66.4) and from directives issued by the OSB. Together, they spell out who can file, how a proposal must be structured, how creditors vote, and how long the process lasts.
At its core, the proposal is an offer: you propose to pay creditors a portion of what you owe, or extend the time you have to pay, or both. According to the Office of the Superintendent of Bankruptcy, the term of a consumer proposal cannot exceed five years. It’s a middle path between trying to pay everything in full and filing for bankruptcy — and for many Canadians, it’s the more sensible option.
Want to see how it stacks up against other formal options? Our bankruptcy vs. consumer proposal guide breaks down the differences side by side.
Who Qualifies in 2026
The BIA sets clear eligibility rules. Under section 66.13, your LIT must verify you’re eligible before filing. In plain language, you qualify if:
- You are a natural person (not a corporation)
- You are insolvent — unable to pay your debts as they come due
- Your total unsecured debts don’t exceed $250,000 (not counting a mortgage on your principal residence)
- You are a resident of Canada or have property here
- You are not currently involved in an open Division I proposal or Notice of Intention
Couples can file a joint proposal if their combined unsecured debts are under $500,000 and their finances are intertwined (shared bills, joint debts, common household). If you’re married and both carry debt, a joint filing can cut costs and simplify the paperwork.
Pros of Following the Consumer Proposal Route
Most proposals settle unsecured debt for significantly less than the full balance, often between 30% and 70% depending on your situation.
Once filed, a stay of proceedings stops wage garnishments, collection calls, and most lawsuits against you.
Unlike bankruptcy, you don’t surrender your home, car, or savings (as long as you stay current on secured payments).
You make one monthly payment to your trustee for up to five years — no interest compounding, no surprises.
If the majority of creditors by dollar value accept, it applies to everyone — even the holdouts.
Cons and Trade-offs
An R7 rating appears on your credit report for the length of the proposal plus three years after completion — a meaningful hit.
The filing appears on the OSB’s public insolvency database, which some employers or lenders can search.
Secured loans, court fines, child or spousal support arrears, and student loans less than seven years old aren’t included.
Miss three payments and the proposal is automatically annulled — you lose the protections and owe the original balances again.
Who Should Consider It
- Canadians with $10,000+ in unsecured debt and steady income they can use for fixed monthly payments
- Homeowners who want to avoid bankruptcy and keep their equity intact
- People facing wage garnishment or relentless collection calls who need the protection to kick in fast
- Those who’ve tried a debt consolidation loan and been declined because of credit score or debt-to-income ratio
- Anyone who wants a formal settlement with legal teeth — not an informal arrangement creditors can walk away from
Who Should Look Elsewhere
- People whose debts are mostly secured (mortgage, car loan) — a proposal doesn’t touch those
- Anyone who can realistically repay their debts in full within two to three years with a stricter budget
- Those with unsecured debt below roughly $10,000 — the setup costs may outweigh the benefit
- People with unstable or seasonal income who can’t commit to fixed monthly payments
- Anyone whose main issue is CRA tax debt plus interest — our credit counselling guide and CRA payment arrangements may fit better first
A Realistic Financial Example
Numbers make this concrete. Here’s a common scenario for a Canadian carrying unsecured debt who qualifies for a proposal:
This is illustrative, not a promise — every proposal is built around what you can realistically pay, what creditors will likely accept, and your asset picture. Real outcomes vary. For more stories grounded in actual cases, see our consumer proposal success stories.
Step-by-Step: How Filing Works
- Book a free consultation with a Licensed Insolvency Trustee. The LIT reviews your income, debts, assets, and goals. They’ll outline every option — not just a proposal — and tell you honestly whether you qualify.
- Draft your proposal. Your LIT calculates a monthly payment you can sustain and an offer creditors are likely to accept. This usually falls between 30% and 70% of what you owe, depending on your situation.
- File with the OSB. Once you sign, your LIT files the proposal electronically with the Office of the Superintendent of Bankruptcy. A stay of proceedings takes effect immediately — creditors must stop collection actions, lawsuits, and wage garnishments.
- Creditors vote within 45 days. If creditors holding more than 50% of the proven claims (by dollar value) accept, the proposal is binding on all unsecured creditors — even those who voted no. If no meeting is requested in 45 days, the proposal is deemed accepted.
- Make monthly payments. You pay a single fixed amount to the trustee each month, who distributes the money to your creditors. Up to 60 months maximum. No interest accrues during the proposal.
- Attend two mandatory counselling sessions. These cover budgeting and root causes of debt. They’re required by the BIA, short, and surprisingly useful.
- Receive your Certificate of Full Performance. Once you’ve completed all payments, the LIT issues the certificate, and the covered debts are legally extinguished.
Ready to see if you qualify?
Is “WHO” (the World Health Organization) involved in Canadian consumer proposals?
No. Consumer proposals in Canada are governed entirely by the federal Bankruptcy and Insolvency Act and administered by Licensed Insolvency Trustees under the oversight of the Office of the Superintendent of Bankruptcy. The World Health Organization has no role in Canadian personal finance or insolvency. If you’ve read content suggesting otherwise, it’s misinformation — stick to the OSB’s official guidance and a Licensed Insolvency Trustee for accurate rules.
How much does a consumer proposal cost in 2026?
You don’t pay your trustee a separate fee out of pocket. The LIT’s fees and disbursements are set by federal regulation and are paid out of the monthly payments you make into the proposal. So if your proposal is $300 per month, the trustee’s regulated fee is drawn from that payment — you’re not billed extra. A first consultation is almost always free, and your LIT is required to explain exactly how the numbers work before you sign anything.
What happens if my proposal is rejected by creditors?
Rejection is uncommon but possible. If the majority of creditors vote no at the meeting of creditors, your LIT can either amend the proposal and resubmit it, or help you consider alternatives like bankruptcy, informal debt settlement, or credit counselling. A rejected proposal doesn’t become bankruptcy automatically — you stay in control of the decision. Most rejections happen because the offer was too low; a modest adjustment often secures acceptance on the second try.
How long does a consumer proposal stay on my credit report?
An Equifax or TransUnion R7 rating appears on your file for the duration of the proposal plus three years after you complete all payments. For a 48-month proposal, that’s about seven years total. While that sounds long, it’s shorter than a second bankruptcy (which can stay up to 14 years), and many Canadians rebuild credit meaningfully well before the rating drops off by using a secured credit card, keeping balances low, and paying on time every month throughout the proposal.
Can I file a consumer proposal more than once?
Yes, but it’s uncommon and the eligibility rules tighten. You cannot file a second proposal while a previous one is still open or unfulfilled. If your first proposal was completed successfully and new financial trouble arises years later, you can file again — though creditors tend to scrutinize a repeat filing more closely. If your first proposal was annulled because payments stopped, you generally cannot file a new one until the original creditors are paid in full or extinguished by a bankruptcy. Talk to a Lic
