Contact Us
Blogs and Advice
Find out more about solutions that are available to you.
Learn More
Client Stories
Our clients come from many different walks of life.
Learn More
Debt Advising
Unsure about your options? Get your free consultation today!
Contact Us
Previous slide
Next slide

What is a Consumer Proposal?

Advantages Disadvantages
  • Payments are at a fixed rate for the agreed-upon duration, under the Licenced Insolvency and Bankruptcies Act. If the client’s income changes, the creditors cannot renegotiate the terms of the CP. For example, if a client finds a new job and sees an increase to their income, they would not have to increase their payments. The amount, duration and interest-free status would remain the same.
  • Payments with a CP are always interest-free whether they have a debt reduction or not.
  • Depending on the client’s income, debt and assets, they may qualify for 65-75% reduction of their total debt.
  • Clients can keep their assets such as houses and/or cars.
  • You can finish the term of the proposal sooner. Removal of the mark on your credit report happens three years after payment is complete or up to six years (whichever is sooner).
  • Consumer Proposals can leave a derogatory mark on the client’s credit report.
  • The client’s credit score will lower when first on the program. It will typically go back up after a few months of successful payments and positive credit use. We cannot tell clients for sure what the exact credit impact will be because we cannot tell this for certain.
    • For example, The impact on your credit score won’t be as negative if the client has made on time mortgage payments.

A consumer proposal is one solution Canadians can leverage for debt relief. It is a legally binding process that only a Licensed Insolvency Trustee (LIT) can submit.

It can work as an offer to pay your creditors a fair repayment plan, based off your current debt, and family situation. It gives you the opportunity to pay back your debts on a plan that takes into account your personal situation and what is affordable. A proposal is 60 months long with the option to pay it off sooner with no penalty.

If approved, you will make your reduced payments to an LIT. They then distribute a portion of it to your creditors (depending on the percentage of debt that each to).

For example, you may have $50,000 in debt. $20,000 of it may be from Credit Card A, and $30,000 may be from a Line of Credit. You may be able to have your debt negotiated down to a maximum reduction of 75%, meaning you may only have to pay back $12,500. The LIT would handle all of this. You would only have to worry about 1 monthly payment of $235.

With most proposals, you’ll also have a grace period of 21 days before you need to make a payment. This begins when you sign off on the consumer proposal and your LIT submits it for approval. Your creditors will then have 45 days to respond and reject and request modifications to the proposal. You can learn more about that process via the Federal Superintendent of Bankruptcy.

There are some drawbacks to a Consumer Proposal.

As it essentially ends your credit history with the accounts included on the proposal, it may negatively impact your credit score. If you’ve only had a relationship with one creditor (one credit card) you may see a significant drop. Yet, those with a diverse credit history will see less impact if significant aspects of your credit will remain (mortgage, car loan).

5 Reasons a Consumer Proposal May be Right for You

  1. You have high-interest loans and feel like you’re getting nowhere on your payments.
  2. You would like to keep your assets, such as your car or home.
  3. You may not be able to make your payments or have recently started to miss them.
  4. Your financial situation may improve in the next 5 years.
  5. The ends just aren’t meeting up.