How a Consumer Proposal Can Help With Bankruptcy

June 8th, 2021
How a Consumer Proposal Can Help With Bankruptcy

If you have found yourself struggling with debt and are considering bankruptcy, there is another option you can consider. It is offers a legal binding and efficient way of dealing with your debt and creditors, and it does not require you to declare bankruptcy to get relief.

That option is called a consumer proposal.

Unclear on what a consumer proposal is? This article will help you understand consumer proposals better, and help guide you in determining what option is the best solution for you.

What Is a Consumer Proposal?

A consumer proposal is successful alternative solution to bankruptcy for Canadians when their debt has become unmanageable.

A consumer proposal is a legally binding agreement that allows you to create a new payment arrangement between you and your creditors. Usually this involves an extension of time and compromising on a portion of the debt and stops all the interest. A consumer proposal requires the help of a Licensed Insolvency Trustee as they help create the terms and  negotiate with your creditors. This allows you to create a new deal that will relieve you from your minimum payments, interest or collections and create one simple monthly payment.

Here are some of the key advantages of a consumer proposal:

  • You can negotiate a term that works for you.
  • Usually you can compromise on the total debt you owe and make payments over a five year period. Every case is unique, but most proposals allow you to compromise a large portion of your debt.
  • You can be creative with your payment terms and have varying payment amounts throughout the five years, if you want or need that flexibility. This might help when you’re starting a new job, or working seasonal employment, or currently waiting for employment insurance etc.
  • You can spread out your payment over a maximum period of five years. Therefore, you can stretch out your income and work with an affordable monthly repayment.
  • Your monthly payment amount will not change. This gives you the ability to know what your monthly costs will be and have no surprises. This also allows you to work overtime and pay off your proposal sooner.
  • The term does not include interest, so unlike when you carry your debt on credit cards, credit lines and payday loans, your debt is no longer compounding and increasing.
  • It is a legally binding agreement between you and your creditors.

4 Reasons Consumer Proposal May be the Best Solution for You

While there are advantages and disadvantages for all of your options, please remember that a consumer proposal is not always the better solution over a bankruptcy. However, here are some of the more popular reasons that cause people to prefer a proposal:

1: It Lets You Keep Control of Your Assets

You can maintain control over your assets and there is no risk to losing them through a consumer proposal. Assets might include houses, cars, investments etc.  With a consumer proposal you get to keep your assets, and they will remain protected at all times. With other debt solutions such as bankruptcy, you may lose some of your existing assets or at least have to contribute money to your estate to keep them.

2: You Only Pay What Is Agreed Upon

When you file for bankruptcy, there is a monthly income-monitoring component and your payments may vary depending on the income you receive each month. This does happen with a consumer proposal.  Once the proposal is agreed upon, there is no income monitoring or fluctuating payments as a result.

3: It Gives You the Lowest Monthly Payment

A consumer proposal may save you a large percentage of your overall debt and the remainder of that debt will be compromised forever! Clearly having the ability to minimize the amount of debt you have to repay will allow you to move forward quicker and get your fresh start sooner. Furthermore, as mentioned, you are no longer having interest compounding upon your debt. It is also a trustworthy, safe and legal process as this is a process that has to be approved by the courts.

4: No More Collection Calls 

As soon as the consumer proposal is filed, you will quickly find your days much more peaceful as your creditors will not be calling any longer. A consumer proposal gives you immediate creditor protection from phone calls and harassment. A consumer proposal will also stop most legal actions and wage garnishments that you may be dealing with.


A consumer proposal may be our best option if you want to avoid bankruptcy and want to maintain control of your assets like a home, trailer and investments. It will allow you to create a new legally binding payment arrangement that works for your budget and often lowers your overall debt and stops the interest.

To know if this is the right one for you, you can contact us at Paul J. Pickering and Associates Limited. We’ve been helping people in London and the surrounding area create consumer proposals and solve their financial issues for over thirty years.  If you have questions, we can help you understand your options and help you determine what works best for you. Request for a free consultation today.