What Happens to Your Assets in a Consumer Proposal in Canada?

Worried about what happens to your house, car, RRSPs, or savings if you file a consumer proposal? You’re not alone. For many Canadians considering this federally regulated debt solution, understanding how assets are treated is the deciding factor. The short answer: a consumer proposal lets you keep control of your assets while negotiating to repay part of what you owe over time. The details, however, depend on the type of asset, your province’s exemption rules, and how your Licensed Insolvency Trustee (LIT) structures your offer.

This guide explains what happens to key assets in a consumer proposal—clearly, practically, and with real-world examples—so you can decide with confidence.

Consumer Proposals in Canada: How They Work

A consumer proposal is a legal process under the Bankruptcy and Insolvency Act that allows you to settle unsecured debt for less than you owe, with fixed monthly payments over up to five years. It’s administered by a Licensed Insolvency Trustee, and once filed, a stay of proceedings stops most collection actions, including wage garnishments and lawsuits.

• Assets do not vest with the trustee (unlike bankruptcy). You keep legal ownership and control unless you choose to sell.
• Secured debts (like mortgages and car loans) continue as usual—you keep the asset if you stay current on payments.
• The size of your offer usually reflects both your ability to pay and what creditors might receive in a bankruptcy scenario.

For an official overview of consumer proposals and your rights, see the Financial Consumer Agency of Canada and the Office of the Superintendent of Bankruptcy on Canada.ca. To understand how the stay works, review our plain-language explainer on the stay of proceedings.

What Happens to Your Assets in a Consumer Proposal: The Core Rule

The defining feature of a consumer proposal is that you typically keep your assets. Instead of surrendering property, you make a structured repayment offer to creditors. Still, asset values matter because creditors compare your offer with what they could receive if you filed bankruptcy. If you have significant home equity, high-value investments, or non-exempt property, your offer may need to be higher to be accepted.

Secured vs. Unsecured Property

Understanding the difference helps predict outcomes:

• Secured assets (e.g., a house with a mortgage, a car with a lien): Keep the asset by continuing payments. If you default, the secured creditor can enforce its security (e.g., repossess), even during a proposal.
• Unsecured assets (e.g., non-registered investments): Not tied to a specific debt. You keep them in a proposal, but their value can influence the offer creditors will accept.

If you’re worried about vehicle repossession, learn your options in our guide to your rights when facing repossession in Canada.

Exempt Assets and Provincial Rules

Each province sets bankruptcy exemptions that protect certain property up to specific limits (e.g., household goods, a vehicle up to a value cap, tools of the trade). While proposals are different from bankruptcy, exemptions still matter because they frame what creditors might get in a bankruptcy comparison.

• Commonly protected categories include reasonable furniture, clothing, tools of the trade, and a vehicle up to a cap.
• Home equity exemptions vary significantly by province.

For a concrete example, see Ontario’s exemption framework in Protect Your Assets: Understanding Ontario Bankruptcy Exemptions and Your Rights.

RRSPs, TFSAs, RESPs, and Pensions

• RRSPs/RRIFs: In bankruptcy, RRSPs are generally protected except contributions made in the 12 months before filing. In a consumer proposal, you normally keep your registered savings. Still, their existence may factor into what’s considered a fair offer.
• Pensions: Most pensions are protected by law. You keep them in a proposal.
• TFSAs: Not typically exempt in bankruptcy. In a proposal, you retain them, but balances may influence the offer size.
• RESPs: Often not exempt in bankruptcy. In a proposal, you keep them, but creditors may expect a comparably fair settlement given their value.

Bottom line: You keep control of registered and non-registered accounts in a proposal, but their values influence negotiations.

Real Estate and Home Equity

Your mortgage continues as usual. The key consideration is your equity (market value minus mortgages and liens):

• Low or no equity: Your offer can be based primarily on your income and budget.
• Significant equity: Creditors may compare what they might receive in a bankruptcy and push for a higher proposal. Some homeowners refinance to fund the proposal or offer a lump-sum payment.

Example: Taylor owns a home worth $600,000 with a $575,000 mortgage (about $25,000 equity) and $60,000 of unsecured debt. Taylor files a consumer proposal at $400/month for 60 months. Because equity is relatively modest, creditors focus on monthly affordability and accept the offer.

Example: Ashton owns a home worth $700,000 with a $600,000 mortgage (about $100,000 equity) and $80,000 unsecured debt. Ashton’s LIT may recommend a slightly higher offer or a refinance-supported lump sum so creditors receive at least as much as a bankruptcy would yield.

Vehicles, Leases, and Car Loans

• Auto loans: Keep the car if you keep payments current. If the payment is unaffordable, you can surrender the vehicle; any shortfall after sale becomes unsecured and is included in the proposal.
• Leases: You can continue a lease if it fits your budget, or end it and include penalties as unsecured debt in the proposal.

Worried about enforcement actions? Know your protections under the stay of proceedings.

Business Assets and Tools (Self-Employed)

Tools of your trade are commonly protected up to a provincial limit in bankruptcy, and you maintain control in a consumer proposal. If you have high-value business assets or accounts receivable, your LIT will factor their value into a fair offer. Keeping essential tools is often crucial to maintaining your income—another reason proposals can be a better fit than bankruptcy for sole proprietors.

Investments and Non-Registered Accounts

Non-registered investments (e.g., stocks in a brokerage account) stay in your name during a proposal. However, creditors will consider their value when weighing the fairness of your offer. Many people prefer keeping long-term investments intact rather than cashing out and triggering taxes—another advantage of proposals over bankruptcy for asset retention.

Tax Refunds, Benefits, and CRA Set-Off

In a consumer proposal, tax refunds are not automatically assigned to the LIT (unlike typical bankruptcy rules). You usually keep refunds for periods after filing unless your proposal includes a special condition or the Canada Revenue Agency applies set-off for pre-filing tax debts before the stay takes effect. For specifics, read our guide on consumer proposals and tax refunds.

Government benefits (such as the Canada Child Benefit) generally continue. According to the Financial Consumer Agency of Canada, your LIT will explain when set-off may apply and how the stay protects you once the proposal is filed and accepted.

What Happens to Income, Windfalls, and New Assets During a Proposal?

Consumer proposals are typically fixed-payment arrangements. Increases in income do not automatically change your monthly payment unless your proposal includes a clause to adjust payments or you voluntarily amend it. Receiving a bonus, inheritance, or insurance payout during your proposal is generally yours to keep. Many people use windfalls to pay off their proposal early without penalty.

Important: always review your proposal terms. Some creditors ask for special conditions (e.g., a percentage of extraordinary windfalls). Your LIT will help you understand and negotiate these terms before you sign.

The Role of Licensed Insolvency Trustees (LITs)

LITs are federally regulated professionals who must act fairly between you and your creditors. They will:

• Assess your income, expenses, and assets
• Explain provincial exemption rules and how they affect a fair offer
• Draft and file your proposal, and negotiate with creditors
• Administer payments and provide mandatory financial counselling

To understand how proposals differ from bankruptcy—especially for assets—see our comparison: bankruptcy vs consumer proposal in Canada (2025).

Practical Steps to Protect Your Assets Before and During Filing

• Do not transfer assets to friends or family before filing. Such transfers can be challenged under the Bankruptcy and Insolvency Act.
• Keep secured payments current (e.g., mortgage, car loan) if you want to retain the asset.
• Document fair market values of major assets. Your LIT will use objective values to structure the offer.
• Know your provincial exemptions. This sets realistic expectations about what creditors could recover in bankruptcy (the baseline for your proposal offer). For a reference point, review Ontario’s bankruptcy exemptions and speak with your LIT about your province.
• Avoid new high-interest borrowing to protect cash flow and strengthen your proposal’s feasibility.

While inflation and interest rates can influence budgets and affordability, proposals remain fixed-payment arrangements. For broader context on rate trends that affect carrying costs, see the Bank of Canada.

Asset Impact: Consumer Proposal vs. Bankruptcy vs. Debt Consolidation

• Consumer proposal: You retain assets, and creditors are paid under a negotiated plan. Asset values may influence the offer size.
• Bankruptcy: Non-exempt assets may vest with the trustee for the benefit of creditors (subject to provincial exemptions). This is why proposals often appeal to homeowners, business owners, and savers.
• Debt consolidation loan: A new loan to repay old debts in full. Assets remain unaffected, but you must qualify, and interest cost can be high for lower credit scores. Learn how consolidation works in Canada and how to compare it with a proposal in our guide to debt consolidation in Canada.

If you’re weighing options, understand the structural differences and costs in bankruptcy vs consumer proposal (2025).

Conclusion

In a Canadian consumer proposal, you typically keep your assets—your home, car, and savings—while you repay a portion of your unsecured debts through an affordable plan. The value and type of your assets help determine what creditors will accept, but your property does not vest with a trustee as it would in bankruptcy. By understanding secured vs unsecured property, provincial exemptions, and how assets inform a fair offer, you can navigate the process with clarity and protect what matters most.

Frequently Asked Questions

Can I keep my house in a consumer proposal?

Yes, if you maintain your mortgage payments. Your home does not vest with the trustee in a proposal. However, if you have significant equity, creditors may expect a higher offer than if there were little or no equity. Your LIT will model both scenarios so the proposal compares favourably to bankruptcy outcomes.

What happens to my car loan or lease?

You can keep a financed or leased vehicle by continuing the payments. If the payment is unaffordable, you can surrender the vehicle; any deficiency after sale becomes unsecured debt and is typically included in your proposal. If you default on payments, the secured creditor can enforce its security.

Are RRSPs and pensions safe in a consumer proposal?

Generally yes. RRSPs and pensions remain under your control in a proposal. In bankruptcy, RRSPs are typically protected except for contributions within the last 12 months. In proposals, those funds are not seized, but their presence may be considered when negotiating a fair offer.

Do I lose my tax refunds in a consumer proposal?

Tax refunds are not automatically assigned to the trustee in a proposal. You usually keep refunds for periods after filing unless your proposal includes special terms or CRA applies set-off for pre-filing debts before the stay takes effect. For details, see our guide on consumer proposals and tax refunds.

What happens if I receive an inheritance or bonus during my proposal?

Consumer proposals are typically fixed-payment arrangements, so unexpected windfalls are usually yours to keep. Many people use them to pay off their proposal early. Always review your specific proposal terms—occasionally, a creditor may request a clause regarding extraordinary windfalls.

Should I move or gift assets before filing?

No. Transferring assets to friends or family before filing can be challenged under the Bankruptcy and Insolvency Act and may jeopardize your case. Discuss any planned transactions with your LIT before taking action. The Government of Canada provides plain-language information on how the Act protects both debtors and creditors.

Is a consumer proposal better for assets than bankruptcy or consolidation?

Often, yes—especially for homeowners, savers, and self-employed Canadians who want to retain assets while reducing debt. Bankruptcy can require the realization of non-exempt assets, while a consolidation loan repays debt in full with interest. Compare structures, costs, and asset impacts in our 2025 guide to bankruptcy vs consumer proposal.

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.