How to File a Consumer Proposal in Canada (Step-by-Step Guide)

If you’re struggling with debt and want to avoid bankruptcy, a consumer proposal may be the best solution. It’s a legal, government-approved way to reduce your debt, pause interest, and make manageable monthly payments — all while keeping your assets.

This guide breaks down how to file a consumer proposal in Canada, what to expect, and how it can impact your credit and financial future.

What Is a Consumer Proposal?

A consumer proposal is a legally binding agreement between you and your creditors, arranged through a Licensed Insolvency Trustee (LIT). It allows you to repay a portion of your total debt — usually between 30% to 70% — over a period of up to five years.

Unlike bankruptcy, you keep your house, car, and personal possessions, as long as you continue making your agreed payments.

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

Step 1: Meet With a Licensed Insolvency Trustee (LIT)

Only a Licensed Insolvency Trustee can legally file a consumer proposal on your behalf.

They’ll:

• Review your debts, income, and assets
• Explain your options (debt consolidation, bankruptcy, or consumer proposal)
• Determine if you qualify

Tip: There’s no upfront cost for the initial consultation — most LITs offer it for free.

Step 2: Prepare Your Proposal

Once you and your trustee decide a proposal is right for you, they’ll:

• Draft an official repayment plan
• Calculate what you can reasonably afford
• File it with the Office of the Superintendent of Bankruptcy (OSB)

As soon as it’s filed, all collection calls, wage garnishments, and lawsuits stop immediately.

Step 3: Creditor Review Period

Your creditors have 45 days to review your proposal. They can:

• Accept the offer
• Reject it and request a meeting
• Negotiate different terms

Most proposals are accepted because creditors typically recover more than they would in a bankruptcy.

Step 4: Make Payments

Once approved, you’ll make one simple monthly payment to your LIT, who distributes the money to your creditors.

Payments are flexible — you can even pay off the proposal early if your financial situation improves.

Step 5: Complete Financial Counselling

You’ll attend two mandatory credit counselling sessions to learn:

• How to rebuild credit
• Budget effectively
• Avoid future debt traps

These sessions are designed to help you succeed after your proposal is complete.

Step 6: Completion and Certificate of Full Performance

Once all payments are made, you’ll receive a Certificate of Full Performance — an official document confirming your debts are legally settled.

What Debts Can Be Included in a Consumer Proposal?

You can include most unsecured debts such as:

• Credit cards
• Personal loans
• Payday loans
• Lines of credit
• Tax debt (CRA)
• Student loans (if over 7 years old)

Secured debts like mortgages or car loans cannot be included.

Advantages of a Consumer Proposal

✅ Stop interest immediately
✅ Protect your assets
✅ Stop collection calls and wage garnishments
✅ Reduce debt by up to 70%
✅ Keep your credit rebuilding potential stronger than bankruptcy

Disadvantages of a Consumer Proposal

⚠️ It will remain on your credit report for 3 years after completion
⚠️ Missed payments can cause it to be annulled
⚠️ Credit access will be limited during the repayment period

Cost of a Consumer Proposal

There are no hidden fees — the cost is built into your monthly payment and regulated by the Canadian government.

Your LIT’s fees are paid out of the money you offer to your creditors, not in addition to it.

After the Proposal: Rebuilding Your Credit

Once complete, it’s time to rebuild. You can:

• Get a secured credit card
• Make all payments on time
• Keep balances low
• Monitor your credit score monthly

Many Canadians see significant credit recovery within 12–24 months.

Final Thoughts



A consumer proposal isn’t the end of your financial story — it’s the restart button. It gives you breathing room, structure, and a path toward financial freedom.

If your car loan or high-interest debt is weighing you down, consider refinancing through CarRefinancing.ca to find a better rate and lower monthly payment while you rebuild.