How to File a Consumer Proposal in Canada: A Practical 2025 Step-by-Step Guide

Overwhelming debt can happen for many reasons—rising living costs, job loss, unexpected bills, or high-interest credit. If you’re a Canadian struggling to keep up with unsecured debts, a consumer proposal is a proven, regulated way to reduce what you owe and regain financial stability without declaring bankruptcy. This guide explains how to file a consumer proposal step by step, what to expect at every stage, and how to improve your chances of acceptance.

Understanding a Consumer Proposal

A consumer proposal is a legally binding agreement, filed through a Licensed Insolvency Trustee (LIT), that lets you repay a portion of your unsecured debt over a set period (up to five years). Interest on included debts stops, collection calls must cease, and you keep your assets unless you choose to surrender them. Proposals are governed by federal law under the Bankruptcy and Insolvency Act and overseen by the Office of the Superintendent of Bankruptcy (OSB) on Canada.ca.

For a thorough overview, see our plain-language resource on what a consumer proposal is and how it works.

Who Qualifies and When to File

You can file a consumer proposal if you:

• Are insolvent (you can’t meet debt payments as they come due), and
• Owe up to $250,000 in unsecured consumer debt (not counting your mortgage). Couples can file a joint proposal up to $500,000.

It’s often the right time to consider a proposal when minimum payments feel unmanageable, creditors are escalating collection, or you’re facing legal action. According to Statistics Canada, household debt is closely monitored because many Canadians face persistent debt pressures, so exploring relief early can help you avoid compounding interest and stress.

Documents to Gather Before You File

Preparing a clear picture of your finances will speed up your filing and improve the quality of your offer. Gather:

• Recent pay stubs, T4s, or proof of income (including benefits).
• Monthly budget (rent, utilities, food, transport, childcare, insurance).
• Statements for credit cards, lines of credit, personal loans, payday loans, and tax balances.
• List of assets (vehicle, RRSP, RESP, home equity) and secured debts.
• Government ID and any legal notices (garnishments, lawsuits).

If your income is variable or you’ve had a recent job loss, review practical supports through Employment and Social Development Canada and learn safe debt strategies in our guide to debt management after job loss.

How to File a Consumer Proposal: Step-by-Step

Here’s the full process, simplified.

Step 1: Assess Your Finances

List all debts, income, and essential expenses. Calculate what you could realistically afford monthly for up to five years without missing rent, food, or utilities. A sustainable budget is crucial for court-approved proposals.

Step 2: Find a Licensed Insolvency Trustee (LIT)

You must file through an LIT. Trustees are federally licensed, regulated, and compensated through the proposal—so there’s no upfront fee for most filers. Learn how to choose a legitimate professional in our guide on finding a Licensed Insolvency Trustee in Canada.

Step 3: Build Your Offer

Your LIT will help set a fair monthly payment based on income, family size, living costs, and remaining debts. Most proposals run 36–60 months. The offer must be attractive enough for creditors to accept (they often compare it to what they’d receive if you filed bankruptcy) but still affordable for you.

Step 4: File with the OSB and Get Immediate Protection

Once your LIT files the proposal with the OSB, a legal stay of proceedings takes effect. This stops most collection actions, wage garnishments, and lawsuits on included debts. Read more about this protection in our explainer on the stay of proceedings.

Step 5: Creditor Vote (and Meeting if Requested)

Creditors have 45 days to vote. Acceptance requires a majority by dollar value, not by the number of creditors. If a meeting is requested, it must occur within 21 days. Your LIT represents you and can negotiate adjustments, such as a slightly higher monthly payment, to secure approval.

Step 6: Start Payments and Complete Counselling

After acceptance, you begin monthly payments to your LIT, who distributes funds to creditors. You must also attend two financial counselling sessions to strengthen budgeting, credit use, and savings habits—an essential part of building long-term stability.

Step 7: Complete and Receive Your Certificate

When you finish all payments and duties, your LIT issues a Certificate of Full Performance. Any remaining unpaid balances on included debts are legally discharged.

What Debts Are Included and Excluded

Most unsecured consumer debts can be included:

• Credit cards, lines of credit, personal loans, overdrafts.
• Payday loans and instalment loans.
• Government debts such as income tax (CRA) balances and some benefit overpayments.

Debts typically excluded from discharge include secured loans (like a car loan tied to the vehicle or a mortgage), child/spousal support, court fines, and some student loans depending on the time since you were last a student. If you keep paying secured debts, you generally keep the asset.

For asset-specific questions, see what happens to your assets in a consumer proposal.

How Much Will You Pay—and for How Long?

Payments are personalized. Your LIT will base your offer on disposable income (after essential costs) and what creditors would reasonably accept. Terms are flexible but usually 36–60 months. Many Canadians appreciate that interest on included debts stops, which makes total repayment more predictable. If you’re comparing the total cost of a proposal against alternatives, review our breakdown of how interest and fees work within proposals.

Impact on Credit, Work, and Assets

Credit: A consumer proposal appears on your credit file during the term and for a period after completion, then drops off according to bureau timelines. Responsible rebuilding—paying bills on time, keeping utilization low, and adding positive tradelines—helps you recover faster.

Work: Filing a proposal is generally a private matter; most employers don’t check or need to know. Some regulated roles have disclosure requirements—ask your LIT if that applies to you.

Assets: You keep your assets unless you choose to surrender them. Continue paying secured debts to retain your car or home.

Tips to Boost Acceptance and Avoid Rejection

• Be realistic with your budget. If your payment is too high, you risk default later.
• Provide complete documentation. Missing statements or income proof slows review.
• Factor in variable income. If seasonal or commission-based, build a buffer.
• Acknowledge creditor priorities. The offer should beat likely bankruptcy returns.
• Communicate changes promptly. If your income drops, ask your LIT about amending terms before you fall behind.

Consumer Proposal vs Other Options

A proposal is one tool among several. Compare with:

• Bankruptcy: Faster but more intrusive; may involve surplus income payments and asset considerations. See our 2025 comparison of bankruptcy vs consumer proposal.
• Debt consolidation: Replaces multiple debts with one loan, but interest may still be high if credit is strained. Learn the real benefits and risks of debt consolidation in Canada.
• Debt management programs (DMPs): Non-profit credit counselling arrangements that seek interest relief from creditors, but they are not legally binding on all creditors.

Economic conditions (inflation, rates, employment) can influence which option is best. You can review how proposals respond to inflationary periods in our inflation and consumer proposals guide.

A Practical Example

Maria owes $48,000 across four credit cards and a personal loan. Her take-home pay is $4,200 monthly. After rent, utilities, food, transport, and necessities, she can afford $325 per month. Her LIT proposes a 60-month plan at $325 ($19,500 total). Creditors compare this to estimated bankruptcy returns and accept the proposal. Collections stop, interest no longer accrues, and Maria completes two counselling sessions. She finishes payments in five years and receives her Certificate of Full Performance; included balances are discharged.

After You Finish: Rebuilding Strong Finances

Rebuilding starts during your proposal and continues after. Focus on:

• Paying all bills on time (automate where possible).
• Using a small-limit card strategically and keeping balances well below 30% of the limit.
• Setting up an emergency fund for unexpected costs.
• Reviewing your budget quarterly and cutting avoidable fees or unused subscriptions.

If you still feel pressure from rising costs, revisit practical tools and market context in our insights on 2025 debt and market trends.

Conclusion

Filing a consumer proposal is a structured, government-regulated path to reduce debt and stop collections while protecting your assets. By working with a Licensed Insolvency Trustee, proposing a realistic payment, and completing counselling, most Canadians can finish their proposal and move forward with a stronger financial foundation. For additional clarity on your rights and duties, consult official resources on Canada.ca and explore our detailed comparisons of consumer proposals vs bankruptcy.