If you’re living in British Columbia and your debt has reached the point where minimum payments barely make a dent, a consumer proposal may be the option nobody has properly explained to you yet. It’s a legal way to settle your unsecured debts for less than you owe — often far less — while keeping your car, your home, and your dignity. No court appearances, no surrendering assets, and no pretending the problem will fix itself.
A consumer proposal in BC works the same way it does everywhere in Canada, because it’s governed by federal law. But there are BC-specific details worth understanding — from how provincial asset exemptions interact with your proposal to what creditors typically accept. This guide walks through all of it in plain language, so you can decide whether it’s the right move for your situation.
What Is a Consumer Proposal?
A consumer proposal is a formal debt settlement arrangement under Canada’s Bankruptcy and Insolvency Act. According to the Office of the Superintendent of Bankruptcy, it allows you to offer your creditors a percentage of what you owe, an extended repayment timeline, or both — with a maximum term of five years. Only a Licensed Insolvency Trustee (LIT) can file one on your behalf, and LITs are federally regulated professionals whose fees are set by government tariff.
Here’s what makes it powerful: once your proposal is filed, a legal stay of proceedings takes effect immediately. Wage garnishments stop. Collection calls stop. Lawsuits by unsecured creditors stop. Interest stops accruing from the date of filing, so every dollar you pay actually reduces your debt.
Your creditors then vote on the offer. If creditors holding the majority of your debt (by dollar value) accept — and most proposals prepared by an experienced LIT are accepted — the agreement binds all of your unsecured creditors, even the ones who voted no. Many people confuse this process with bankruptcy, but they are quite different; we’ve broken down the distinction in our guide to whether a consumer proposal is the same as bankruptcy.
Pros of Filing a Consumer Proposal in BC
Unlike bankruptcy, a consumer proposal doesn’t put your home equity, vehicle, or RRSP savings at risk. You keep what you own as long as you keep making your agreed payments.
Many BC filers settle for a fraction of what they owe, depending on income, assets, and what creditors would receive in a bankruptcy.
From the day you file, interest on included debts freezes. Your payments go entirely toward the settled amount.
Garnishments, collection calls, and lawsuits from unsecured creditors must stop. This protection is automatic and enforceable.
Your payment never changes, there are no hidden fees, and you can pay the proposal off early with no penalty.
Cons to Consider Before You File
A consumer proposal is recorded on your credit report as an R7 rating and remains for three years after your final payment. As RBC explains, it’s less damaging than bankruptcy, but it’s not invisible.
Your mortgage and car loan stay outside the proposal. You must keep paying them (or surrender the asset).
If you fall the equivalent of three months behind, your proposal is annulled — and your full original debt, plus interest, can come back.
Most proposals run three to five years, and you must complete two financial counselling sessions along the way.
Who Should Consider a Consumer Proposal
A consumer proposal tends to be the right fit for British Columbians who:
- Owe between roughly $10,000 and $250,000 in unsecured debt (credit cards, lines of credit, payday loans, personal loans, or tax debt owed to the CRA)
- Have a steady income and can afford a reduced monthly payment
- Own assets — home equity, a vehicle, savings — they’d risk losing in a bankruptcy
- Are facing wage garnishment or collection lawsuits and need legal protection now
- Can’t realistically repay their debt in full within five years
Who Should Look at Other Options First
A consumer proposal is probably not the best first move if you:
- Could repay your debt in full within about five years with a structured plan — a debt management plan would protect your credit rating better
- Owe less than about $10,000, where simpler options like credit counselling usually make more sense
- Have no stable income to fund monthly payments — creditors need to see a credible offer
- Owe more than $250,000 in unsecured debt, which requires a Division I proposal instead
What It Costs: A BC Example
Here’s a realistic example of how the numbers can work for someone in British Columbia with $48,000 of unsecured debt and a budget that can support about $270 per month:
The LIT’s fees come out of the $16,200 — you don’t pay anything extra on top, and the initial consultation is free. Every situation is different: your offer depends on your income, your assets, and what your creditors would recover if you filed for bankruptcy instead.
How to File a Consumer Proposal in BC
- Book a free consultation with a Licensed Insolvency Trustee. The LIT reviews your debts, income, assets, and budget, and explains every option — not just a proposal.
- Build the offer together. You and the LIT settle on an amount and timeline your budget can genuinely sustain, structured so creditors are likely to accept.
- The LIT files the proposal. The stay of proceedings takes effect immediately: interest freezes, garnishments and collection activity stop.
- Creditors vote within 45 days. If creditors holding a majority of your debt accept, the proposal binds everyone. Most reasonable offers pass without a meeting.
- Make your monthly payments and complete two counselling sessions. The sessions cover budgeting and rebuilding credit — practical tools, not lectures.
- Receive your Certificate of Full Performance. Once your last payment is made, the remaining included debt is legally wiped out.
Worried about life during the proposal? Day-to-day banking continues as normal, and while new credit is harder to get, it’s not impossible — here’s what to know about getting a loan during a consumer proposal. And if a debt collector contacts you improperly while you’re protected, Consumer Protection BC oversees collection conduct in the province.
Ready to see if you qualify?
Frequently Asked Questions
How much does a consumer proposal cost in BC?
There are no upfront or hidden fees. The Licensed Insolvency Trustee’s fees are set by a federal government tariff and are paid out of the monthly payments you already make in your proposal — not on top of them. Your first consultation with an LIT is free, and you’ll know your estimated monthly payment before you commit to anything.
Will I lose my house or car in a consumer proposal?
No. Keeping your assets is one of the main reasons people choose a proposal over bankruptcy. Your home, vehicle, RRSPs, and other property are not surrendered. You do need to keep making payments on any secured debts, like your mortgage or car loan, since those sit outside the proposal.
How long does a consumer proposal stay on my credit report in BC?
The proposal appears as an R7 rating and is generally removed three years after you make your final payment. Because you can pay a proposal off early with no penalty, finishing sooner also starts that three-year clock sooner. Many people begin rebuilding credit with a secured credit card while still in their proposal.
What debts can be included in a consumer proposal?
Most unsecured debts qualify: credit cards, personal loans, lines of credit, payday loans, most CRA tax debt, and student loans if it has been at least seven years since you left school. Secured debts (mortgages, car loans), child support, alimony, and court fines cannot be included.
What happens if my creditors reject the proposal?
Outright rejection is uncommon when a proposal is prepared realistically. More often, creditors counter-offer — asking for a somewhat higher total — and your LIT negotiates terms you can still afford. If no agreement is reached, you’re back to your other options, including revising the offer or considering bankruptcy. You are not automatically bankrupt if a proposal fails.
After 20 years of structuring multi-million dollar corporate debt facilities and corporate turnarounds in investment banking, Marcus now leads Canadian Debt Relief to apply those exact same balance-sheet optimization frameworks to Canadian household debt.
