Consumer Proposals: Helping You Get Rid of Your Debts

February 9th, 2022
Consumer Proposals: Helping You Get Rid of Your Debts

When you can no longer repay all your debts in a timely manner, you need to look at all the options available to you to avoid creating a deeper debt that will be even harder to recover from. One such debt solution would be to file a consumer proposal.  Many Canadians aren’t sure what a consumer proposal is or how is it different from filing a bankruptcy.  Consumer proposals and bankruptcy are legislated options available to you in Canada that can provide debt relief, but consumer proposals do have advantages depending on your situation. This guide should help you discover how consumer proposals work, if they are right for you and how you can utilize them to fix your financial woes.

What Are Consumer Proposals? 

A consumer proposal is a legally binding agreement between you and your creditors to create new payment terms. It stops the interest, stops collections and legal action, and often includes a reduced amount of the unsecured debts you owe over a specific timeline. It allows you to offer  new payment terms while also allowing creditors to ability to vote on the proposal and allow them to recover a greater amount of money than if you were to file for bankruptcy.

Consumer proposals are administered with the help of a Licensed Insolvency Trustee (LIT). The trustee will help you formulate the proposal which will demonstrate that you are reasonably able to pay back some percentage of your total debt back with a payment plan over a set period of time.

Consumer Proposals vs. Bankruptcy

When facing insolvency, two of the most common debt relief solutions are filing a consumer proposal or bankruptcy. While both solutions resolve debt problems and provide legal protection from creditors, they are different from each other.

  • When filing a consumer proposal, the goal is generally to lower your monthly payments to your creditors by negotiating with them while being able to keep your assets.
  • However, in a bankruptcy, you may have to surrender some of your assets to your creditors in exchange for the elimination of your debts. Some people look at bankruptcy as a last resort, while a consumer proposal would be a more moderate and comfortable remedy for those with debt issues. But remember, a consumer proposal isn’t always best for all people.

Filing a Consumer Proposal

The process of filing a consumer proposal starts by speaking with a Licensed Insolvency Trustee. Your trustee is a licensed professional with expertise in dealing with all levels of personal and corporate debt.   You will work with your trustee to develop a sensible proposal that you can live with and that your creditors will hopefully accept. The goal  is to create a proposal that will benefit you by reducing your monthly payments, eliminate accruing interest, stop collection activity and finding an acceptable recovery for your creditors.

What Happens After Filing a Consumer Proposal? 

Once the proposal is sent to your creditors, they have a fixed period of (45 days) to review and  vote on your proposal.  During this review period, you get immediate relief and creditors must  suspend all collection activity against you.

There are two outcomes to expect after filing the proposal.  One is that if your creditors vote to accept the proposal, all collection efforts, creditor calls and correspondence, garnishments, legal action must stop as does mounting interest and penalties.  You will then start paying the agreed upon proposal payments through the trustee until all of the terms are complete. You then receive your Certificate of Full Performance.

The second outcome is if your creditors vote to reject the proposal.   Creditors can reject the proposal if they want to get more money from you, however this does not mean that this happens often. Creditors are reasonable and very willing to work with you to achieve a greater a recover than a bankruptcy.  If they do reject your proposal, it’s likely because the creditor thinks your proposal is not a greater recovery option than the bankruptcy process. So they may feel that they will receive more money if a bankruptcy were to occur based on the assets you own.   When that happens, the trustee will discuss options and next steps with you that may include offering to amend the proposal terms and likely offer more money  or to explore bankruptcy as another option.


A consumer proposal is a viable alternative to bankruptcy for many individuals struggling to keep up with their debts. It doesn’t involve giving up any of your assets but instead focuses on negotiating with your creditors and likely compromising your debts.

Solving financial problems is much easier with the help of Paul J. Pickering and Associates Limited.    We have over 30 years of experience in helping our clients resolve their financial problems. We specialize in debt management, proposals. consumer proposals, debt counselling and bankruptcy in London, Ontario.  Whether you’re starting to get overwhelmed and you don’t know how to handle your debts and minimum payments, contact our office today for your free initial consultation, and we’ll put together a plan that will work for you! . Contact us today and let us help you make a fresh start with our debt relief solutions.