What Are Consumer Proposal Services in Canada?
If you’re drowning in debt and looking for a way out that doesn’t involve bankruptcy, consumer proposal services may be exactly what you need. A consumer proposal is a formal, legally binding process that lets you settle your unsecured debt for less than the full amount — often between 20% and 50% of what you owe — through affordable monthly payments spread over up to five years.
But you can’t file a consumer proposal on your own. The process must be administered by a Licensed Insolvency Trustee (LIT), a federally regulated professional who is the only person in Canada legally authorized to file consumer proposals and bankruptcies. Understanding how these services work — and how to choose the right trustee — can make the difference between a smooth path to debt freedom and a frustrating experience.
How Consumer Proposal Services Work
A consumer proposal is governed by the Bankruptcy and Insolvency Act (BIA), which means it carries real legal protections that informal debt solutions simply can’t offer. According to the Office of the Superintendent of Bankruptcy Canada, over 150,000 consumer proposals are filed each year — and that number has been growing steadily as more Canadians choose this option over bankruptcy.
Here’s what happens when you use consumer proposal services. Your Licensed Insolvency Trustee reviews your full financial picture — income, expenses, assets, and debts. Together, you determine a realistic offer to present to your creditors. The LIT then files the proposal with the OSB and sends it to your creditors. Once a majority of creditors (by dollar value) accept the proposal, it becomes legally binding on all of them — even the ones who voted against it.
From the moment your proposal is filed, an automatic stay of proceedings kicks in. That means creditors must stop all collection calls, wage garnishments, and legal actions against you. You then make your agreed-upon monthly payment to the LIT, who distributes the funds to your creditors. There is no interest added to your payments, and your total repayment amount is locked in for the entire term.
Pros of Using Consumer Proposal Services
Cons to Consider
Who Should Consider Consumer Proposal Services
- You have between $10,000 and $250,000 in unsecured debt (credit cards, personal loans, tax debt, payday loans)
- You have a steady income but can’t realistically pay back everything you owe
- You want to keep your home, car, and other assets
- Collection calls and wage garnishments are affecting your daily life
- You’ve looked into debt consolidation but can’t qualify for a loan or the interest is still too high
Who Should Look Elsewhere
- Your debt is under $10,000 — credit counselling or a debt management plan may be a better fit
- You can realistically pay off your debt within 12–18 months through budgeting
- Your debt is primarily secured (mortgage, car loan) — consumer proposals only cover unsecured debt
- You owe more than $250,000 in unsecured debt (excluding your mortgage) — you may need a Division I Proposal instead
- You don’t have any regular income to support monthly payments
Financial Example: How Much Can You Save?
Let’s say you owe $45,000 in unsecured debt — a common situation for Canadians carrying balances on multiple credit cards and a line of credit. Here’s what consumer proposal services might look like compared to paying the minimum:
In this example, you’d pay roughly $263 a month for five years instead of struggling with minimum payments for eight years or more. And because there’s no interest on consumer proposal payments, every dollar goes directly toward settling your debt. Many Canadians have found this kind of relief — you can read some of their consumer proposal success stories for real-life examples.
Steps to Get Started with Consumer Proposal Services
- Gather your financial information. Collect recent pay stubs, a list of all debts (creditor names, balances, account numbers), your monthly expenses, and information about any assets you own. The more organized you are, the faster your consultation will go.
- Book a free consultation with a Licensed Insolvency Trustee. Most LITs offer a free initial assessment. During this meeting, they’ll review your situation and explain whether a consumer proposal is the best option for you — or whether another path like bankruptcy or a consolidation loan makes more sense.
- Work with your LIT to build the proposal. Your trustee will help you determine a fair offer amount based on what you can realistically afford and what creditors are likely to accept. The goal is a payment that’s manageable for you while being attractive enough for creditors to approve.
- Your LIT files the proposal with the OSB. Once filed, the automatic stay of proceedings takes effect immediately. Collection calls stop, garnishments are released, and lawsuits are paused.
- Creditors vote on the proposal. Creditors have 45 days to accept or reject. If a majority by dollar value accepts (or doesn’t respond, which counts as acceptance), the proposal is legally binding on everyone.
- Make your monthly payments. You pay your LIT each month for the agreed term (up to 60 months). You’ll also attend two mandatory financial counselling sessions to build better money management skills.
- Complete the proposal and rebuild. Once you’ve made all your payments and attended your counselling sessions, you receive a Certificate of Full Performance. Your credit begins to recover, and you can start rebuilding with a clean slate.
How to Choose the Right Licensed Insolvency Trustee
Not all consumer proposal services are created equal. While every LIT is federally licensed and regulated, the quality of service, communication, and support can vary significantly from one firm to another. Here’s what to look for:
Check their licence. Make sure your trustee is listed on the OSB’s official directory. Anyone offering to file a consumer proposal who isn’t a licensed trustee is operating illegally.
Look for a free, no-pressure consultation. Reputable firms will assess your situation at no cost and explain all your debt relief options — not just push you toward a consumer proposal. If someone is pressuring you to sign up before you’ve had time to think, that’s a red flag.
Ask about their acceptance rate. Experienced LITs know how to structure proposals that creditors will accept. Ask how many of their proposals are accepted on the first submission — a high acceptance rate is a good sign.
Consider communication style. You’ll be working with this firm for up to five years. Do they return calls promptly? Are they patient with your questions? Do they explain things in plain language? These details matter more than you’d think over a long-term relationship.
Read reviews from real clients. Online reviews on Google can give you a sense of how a firm treats its clients day-to-day. Look for comments about responsiveness, transparency, and how supported people felt throughout the process.
Ready to see if you qualify?
Frequently Asked Questions
How much does it cost to use consumer proposal services?
There is no upfront fee to file a consumer proposal in Canada. The Licensed Insolvency Trustee’s fees are set by a government-regulated tariff and are paid out of the monthly payments you already make as part of the proposal. In other words, the cost is built into your payment plan — you don’t pay anything extra on top of the amount you agree to repay your creditors.
Can I choose any Licensed Insolvency Trustee, or do I have to use a specific one?
You can choose any Licensed Insolvency Trustee in Canada — you’re not required to use a specific firm or one recommended by a debt consultant. In fact, if a company that isn’t an LIT is offering to “arrange” a consumer proposal for you, be cautious. Only a licensed trustee can legally file one. You have the right to shop around, compare consultations, and choose the LIT you feel most comfortable with.
What happens if my creditors reject my consumer proposal?
If creditors reject your initial offer, it’s not the end of the road. Your LIT can negotiate with creditors and submit a revised proposal with adjusted terms — for example, a higher repayment amount or a longer payment period. In practice, most consumer proposals are accepted because creditors typically receive more through a proposal than they would in a bankruptcy. If no agreement can be reached, you still have other options like bankruptcy or informal repayment arrangements.
Will a consumer proposal stop collection calls and wage garnishments?
Yes, immediately. The moment your Licensed Insolvency Trustee files your consumer proposal with the Office of the Superintendent of Bankruptcy, an automatic stay of proceedings takes effect. This legally forces all unsecured creditors to stop collection calls, halt wage garnishments, and pause any lawsuits against you. This legal protection is one of the biggest advantages of a consumer proposal over informal debt settlement.
How long does a consumer proposal stay on my credit report?
A consumer proposal places an R7 notation on your credit report for the duration of the proposal plus three years after you complete it — or six years from the filing date, whichever comes first. For example, if you complete a five-year proposal on schedule, the R7 notation would be removed three years later. Many people start seeing improvements in their credit score well before the notation is removed, especially if they take active steps to rebuild, such as getting a secured credit card.
