Consumer Proposals in Toronto: Your Complete 2026 Guide

If you’re carrying more debt than you can realistically pay back, you’re not alone — and you’re not out of options. Thousands of Toronto residents file consumer proposals every year to get a fresh start without losing their home, their car, or their dignity. A consumer proposal is one of the most practical, legally protected ways to reduce what you owe and rebuild your finances on your own terms.

In this guide, we’ll walk you through exactly how consumer proposals work in Toronto in 2026 — what qualifies you, what it costs, what happens to your credit, and how to take the first step. Whether you’re dealing with credit card debt, personal loans, or tax arrears, there’s a clear path forward.

Quick Answer A consumer proposal is a legal agreement, filed through a Licensed Insolvency Trustee (LIT), that lets you repay a portion of your unsecured debt — often 30%–70% less than you owe — over up to five years. It immediately stops interest charges, collection calls, and wage garnishments, and you keep your assets. It’s the most common alternative to bankruptcy in Canada.

What Is a Consumer Proposal?

A consumer proposal is a formal, legally binding process governed by the Bankruptcy and Insolvency Act (BIA) of Canada. It allows you to negotiate with your creditors to repay only a percentage of your total unsecured debt — or extend the time you have to pay it back — through a Licensed Insolvency Trustee. Only a licensed trustee can file one on your behalf; no other financial advisor or debt company has the legal authority to do so.

Once your proposal is filed, all interest stops. Collection calls stop. If a creditor has garnished your wages or frozen your bank account, that stops too. Your creditors then have 45 days to review the terms. In practice, the vast majority of consumer proposals in Toronto are accepted, because creditors typically receive more through a proposal than they would if you filed for bankruptcy.

Unlike bankruptcy, a consumer proposal lets you keep your assets — your home, your car, your RRSP. You make one fixed monthly payment for up to five years, and once you’ve completed all your payments, the remaining debt is legally discharged. It’s a structured, dignified way to deal with debt that has grown beyond your ability to manage.

Advantages of Filing a Consumer Proposal in Toronto

✅ Significant Debt Reduction Most people who file a consumer proposal in Toronto end up paying back only 20%–70% of what they owe. The exact amount depends on your income, assets, and what your creditors will accept. For many, this means saving tens of thousands of dollars compared to paying debts in full.

✅ Keep Your Assets Unlike bankruptcy, a consumer proposal does not require you to surrender your home, vehicle, investments, or other property. This is one of the biggest reasons Toronto residents choose a proposal over bankruptcy — especially homeowners with equity.

✅ Immediate Legal Protection The moment your proposal is filed, a “stay of proceedings” goes into effect. This is a legal order that stops all creditor actions — no more collection calls, no lawsuits, no wage garnishments. If the CRA has been taking money from your paycheque, that stops too.

✅ One Fixed Monthly Payment Instead of juggling multiple bills with different interest rates and due dates, you make one predictable payment each month. The amount is based on what you can actually afford, and it never increases — even if your income changes after filing.

✅ No Interest Charges All interest on your unsecured debts freezes the day you file. This alone can save you thousands of dollars over the life of the proposal, especially if you’ve been carrying high-interest credit card balances or payday loan debt.

Potential Drawbacks to Consider

❌ Credit Rating Impact A consumer proposal will appear on your credit report as an R7 rating for three years after you complete it (or six years from the date you filed, whichever comes first). This is less severe than the R9 rating from bankruptcy, but it will affect your ability to get new credit during that period.

❌ Not All Debts Qualify Consumer proposals only cover unsecured debts — things like credit cards, personal loans, lines of credit, payday loans, and some tax debts. Secured debts like your mortgage or car loan are not included. Student loans may also be excluded if you graduated less than seven years ago.

❌ Public Record Your consumer proposal is filed with the Office of the Superintendent of Bankruptcy and becomes a public record. While most people will never look it up, it is technically searchable. In practice, this rarely causes issues for the average person.

❌ Must Be Accepted by Creditors Your creditors get a vote. If those holding the majority of your debt reject the terms, you may need to offer a higher repayment amount or consider other options. That said, most proposals are accepted — creditors prefer getting something over getting nothing through a bankruptcy.

Who Should Consider a Consumer Proposal in Toronto

You owe less than $250,000 in unsecured debt (not counting your mortgage)
You have a steady income but can’t keep up with minimum payments and interest
You own a home or vehicle you want to protect from creditors
Collection calls, wage garnishments, or CRA actions are making it impossible to function
You’ve tried debt consolidation or budgeting but the debt is still growing
You want to avoid bankruptcy and its more severe consequences

Who Should Look at Other Options

Your total unsecured debt exceeds $250,000 — you may need a Division I proposal or bankruptcy instead
You have no income and can’t commit to any monthly payment at all
Your debts are mostly secured (mortgage arrears, car loans) — a consumer proposal won’t cover these
You only owe a small amount (under $5,000) and could pay it off with a structured budget or credit counselling
You recently graduated and your primary debt is student loans less than seven years old

A Real-World Toronto Debt Example

Here’s a common scenario we see among Toronto residents considering a consumer proposal. Let’s say you’re carrying a mix of credit card debt, a personal line of credit, and some CRA tax arrears:

Credit Cards (2 cards)$18,500

Personal Line of Credit$12,000

CRA Tax Debt$6,500

Payday Loans$3,000

Total Unsecured Debt$40,000

Consumer Proposal Payment (est.)$16,000

In this example, the proposal offers creditors $16,000 paid over 48 months — roughly $333 per month. That’s a 60% reduction in total debt, with zero interest. Without the proposal, this person would be paying well over $50,000 once you factor in accumulated interest and penalties. The exact terms depend on your specific financial situation, but reductions of 50%–80% are common in Toronto consumer proposals.

Every situation is different. The amount you’d pay in a consumer proposal depends on your income, your assets, your family size, and what your creditors are willing to accept. A free consultation with a Licensed Insolvency Trustee is the best way to get a realistic estimate.

How to File a Consumer Proposal in Toronto

Book a free consultation with a Licensed Insolvency Trustee. This is always the first step. A licensed trustee will review your full financial picture — income, debts, assets, and monthly expenses — and explain all of your options. In Toronto, most trustees offer free, no-obligation consultations by phone, video, or in person. You can find a licensed trustee through the Office of the Superintendent of Bankruptcy’s search tool.
Your trustee drafts the proposal terms. Based on your financial assessment, your trustee will calculate a fair offer — one that’s affordable for you and reasonable enough for your creditors to accept. They’ll determine your monthly payment, the total amount, and the length of the proposal (up to 60 months).
The proposal is filed with the government. Once you sign, your trustee files the consumer proposal with the Office of the Superintendent of Bankruptcy. The moment it’s filed, all collection activity must stop by law. Interest freezes. Garnishments are lifted. You’re immediately protected.
Creditors review and vote. Your creditors have 45 days to review the proposal. They can accept, reject, or request changes. If creditors holding a majority of your debt (by dollar value) accept the terms, the proposal is binding on all your unsecured creditors — even those who voted against it.
You make your monthly payments. Once accepted, you simply make your fixed monthly payment to your trustee, who distributes it to your creditors. You’ll also attend two financial counselling sessions, which are a legal requirement and help you build stronger money habits going forward.
Complete the proposal and receive your discharge. After you’ve made all your payments and completed your counselling sessions, your remaining debt is legally eliminated. You’ll receive a Certificate of Full Performance, and you can begin rebuilding your credit with a clean slate.

The Bottom Line

The Bottom Line For thousands of Toronto residents every year, a consumer proposal offers a realistic, legally protected path out of overwhelming debt. It won’t fix everything overnight — it takes commitment and discipline — but it stops the bleeding, protects what you’ve built, and gives you a clear finish line. If you’re struggling with unsecured debt and want to avoid bankruptcy, it’s worth having a conversation with a Licensed Insolvency Trustee to see what a proposal could look like for you.

Ready to see if you qualify for a consumer proposal in Toronto?

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Frequently Asked Questions

How much does a consumer proposal cost in Toronto?

There is no upfront cost to file a consumer proposal. Your Licensed Insolvency Trustee’s fees are included in the payments you make as part of the proposal — they’re set by government regulation, not charged separately. The total amount you pay depends on your income, assets, and how much debt you owe, but most people end up paying 20%–70% of their original debt over a period of up to five years. Your trustee will give you a clear estimate at your free initial consultation.

Will a consumer proposal affect my ability to rent an apartment in Toronto?

It can, but the impact is usually manageable. Some landlords run credit checks, and a consumer proposal will show up as an R7 rating on your credit report. However, many Toronto landlords focus more on your current income and rental history than on past credit issues. Being upfront about your situation and showing proof of stable income often helps. Once your proposal is complete and your credit starts recovering, this becomes less of a concern over time.

Can I include CRA tax debt in a consumer proposal?

Yes, you absolutely can. Personal income tax debt, GST/HST arrears, and other amounts owed to the Canada Revenue Agency are considered unsecured debts and can be included in a consumer proposal. This is a major benefit — the CRA is one of the most aggressive collectors in Canada, and a consumer proposal stops their collection actions, including wage garnishments and bank account freezes, the moment it’s filed. Many Toronto residents file specifically because CRA debt has become unmanageable alongside other obligations.

How long does a consumer proposal stay on my credit report?

A consumer proposal stays on your credit report for three years after you complete all your payments, or six years from the date you filed — whichever comes first. For example, if you file a four-year proposal and complete it on time, it will drop off your report one year after your final payment. During this period your rating is listed as R7. Once it’s removed, you can continue rebuilding your credit. Many people start seeing improvement even before the notation is fully removed by using a secured credit card and making consistent on-time payments.

What happens if I miss a payment on my consumer proposal?

If you miss three payments, your consumer proposal is automatically annulled — meaning it’s cancelled and you lose the legal protection it provides. Your creditors can resume collection efforts, and the debt goes back to its original amount (minus whatever you’ve already paid). If you’re having trouble making payments, contact your trustee right away. In many cases, they can help you amend the terms of the proposal — for example, extending the payment period or adjusting the monthly amount — before it reaches the point of annulment. The key is to communicate early rather than simply missing payments.

Marcus Chan( Principal & Institutional Finance Analyst )

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.