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Consumer Proposal

Consumer proposals are legal proposals, where a licensed insolvency trustee (LIT) agrees with creditors to let an individual pay back a portion of their debt, and/or extend the repayment period (to a maximum of five years), to prevent creditors from taking legal action against you. A consumer proposal is possible for debts that are less than $250,000. The process is an alternative to bankruptcy, allowing you to keep most of your assets while stopping actions by unsecured creditors, e.g. wage garnishments. Consumer proposals can show on credit reports for up to six years.

Cost: You will pay fees to the LIT.

Process

You should contact a Licensed Insolvency Trustee (LIT). A list of LITs can be found through the Office of the Superintendent of Bankruptcy Canada.

With the LIT, you will work out a proposal to allow you to pay off a portion of the debt and/or extend the repayment period (to a maximum of five years). One the proposal is agreed, the LIT will file it with the Superintendent of Bankruptcy.

If the proposal is accepted, you will make payments to the LIT, who will pay the creditors. You must stick to the terms of the proposal and attend financial counselling sessions.

If the proposal is rejected, you can decide to amend it and resubmit, use another method to manage their debts, or apply for bankruptcy.

Find out more:

Practical Money Skills – information about consumer proposals vs. bankruptcy | FCAC – information about consumer proposals