If you are sitting with a pile of statements you have stopped opening, you are not out of options. A consumer proposal is the most common formal debt solution in Canada, and the rules about who can file one are clearer than most people expect. There is no credit score requirement, no minimum income, and no judge deciding whether you deserve help.
This guide explains consumer proposal eligibility in Canada in plain language: the four conditions you must meet, who cannot file, how the process works from first meeting to final certificate, and whether a proposal fits your situation in 2026.
What is consumer proposal eligibility?
A consumer proposal is a legally binding offer to your unsecured creditors, filed under Division II of the federal Bankruptcy and Insolvency Act. You offer to repay part of what you owe, or take longer to pay, or both, and the rest is legally released when you finish. Because it is federal law, the rules are identical in every province and territory.
The Act defines a “consumer debtor” as an individual who is insolvent (or already bankrupt) and whose total debts, excluding any debt secured by their principal residence, are not more than $250,000. Insolvent means you cannot pay your debts as they come due, or what you own is worth less than what you owe. You also need to live in Canada, run a business here, or own property here. The Office of the Superintendent of Bankruptcy (OSB) confirms the $250,000 threshold and the five-year maximum term.
The fourth condition is practical: you must be able to make the payments you offer. A Licensed Insolvency Trustee (LIT) must investigate your finances first and cannot file a proposal if they believe you are not eligible. That protects you from a plan you cannot keep. Our consumer proposal FAQ covers what comes after eligibility.
What a consumer proposal does well
The drawbacks to weigh
Who should consider filing
- Your unsecured debt is roughly $10,000 to $250,000 and growing rather than shrinking.
- You have steady income from a job, self-employment, a pension or benefits and can commit to a fixed monthly payment.
- You own a home with equity, a newer vehicle or savings you would lose in bankruptcy.
- You want a firm end date and a legal release from the debt, not just a lower rate.
Who should look elsewhere
- Your unsecured debt is over $250,000. A Division I proposal or bankruptcy may apply instead.
- You have no reliable income at all. If you cannot fund payments, the LIT cannot file.
- Your debt is small enough for a budget or a debt management plan, which is not an insolvency filing.
- You are a corporation. Consumer proposals are for individuals only.
A worked example
Consider a warehouse supervisor in Manitoba earning $4,300 a month after tax, with a $310,000 mortgage (excluded from the limit) and a car loan they keep paying outside the proposal. Their unsecured debts:
Minimum payments alone eat more than $1,300 a month, so they are insolvent even though the mortgage has never been late. The LIT proposes $300 a month for 60 months:
The LIT’s fees are set by federal regulation and come out of the $300, not on top of it. Tax debt is included: the CRA is an unsecured creditor and votes like any other. See our guide to consumer proposals for tax debt.
How the filing process works
- Book a free consultation with a Licensed Insolvency Trustee. Only a LIT can file a consumer proposal. They review your debts, assets, income and expenses and confirm you meet the four conditions.
- Build the offer together. The LIT works out what creditors are likely to accept, generally more than they would get in a bankruptcy, and what you can realistically pay for up to five years.
- Sign and file with the OSB. From that moment, garnishments and lawsuits on included debts stop and you stop paying those creditors directly.
- Creditors have 45 days to respond. Creditors holding at least 25% of proven claims can request a meeting. If none is requested within 45 days, the proposal is deemed accepted. If a meeting is held, a simple majority by dollar value decides.
- Court approval. The OSB or any interested party then has 15 days to ask for a court review. If nobody does, the proposal is deemed approved by the court.
- Make your payments and attend two counselling sessions. You pay the LIT, who distributes the money to creditors. The two sessions are mandatory and cover budgeting and rebuilding.
- Receive your certificate of full performance. When the last payment clears, the remaining balance on included debts is released. Send a copy to Equifax and TransUnion so your file is updated.
Ready to see if you qualify?
Frequently asked questions
Is there a minimum debt to file a consumer proposal?
No. The Act sets a $250,000 maximum on unsecured debt but no minimum. In practice, most LITs suggest a proposal makes sense once unsecured debt is above roughly $10,000, because below that a budget, a consolidation loan or a debt management plan may solve the problem without an insolvency filing on your credit report. A LIT will tell you frankly if your debt is too small to justify it.
Can I file a consumer proposal if I am unemployed?
Yes, if you have a reliable way to fund the payments. Employment income is not the only kind that counts: pension income, disability benefits, EI, self-employment earnings or help from a family member all work, and some proposals are funded by a single lump sum. What you cannot do is file with no means to pay at all, because the LIT must confirm the plan is realistic before filing it.
Does my spouse’s debt count toward my $250,000 limit?
No. The limit applies to each individual’s own debts. Debts that belong only to your spouse are not your responsibility and do not count against your limit. If you share most of your debts, the Act allows two proposals to be handled together as a joint consumer proposal, which usually lowers the cost. Your LIT will review both sets of finances and recommend joint or separate filings.
Can I file a consumer proposal more than once?
Yes, with conditions. If a previous proposal was completed successfully, you can file another if you become insolvent again, though creditors will look closely at the history. If a previous proposal was annulled for missed payments, the Act restricts when you can file again. We cover the specifics in Can You File a Consumer Proposal More Than Once?
How long does a consumer proposal stay on my credit report?
The OSB is direct about this: a person who files a consumer proposal is generally assigned the lowest credit rating on the included debts. The proposal stays on your report for the length of the term plus a period afterward, typically three years from completion, depending on the bureau and your province. The upside is that most people filing already have damaged credit and rising balances, and a completed proposal gives you a clean, verifiable starting point to rebuild. The Financial Consumer Agency of Canada explains how credit reports and scores work.
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.
