Check whether a consumer proposal fits your debt, income, and assets — the $250,000 limit, what payment creditors accept, and what makes a proposal succeed or fail.
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A consumer proposal is a formal, legally binding agreement under Canada's Bankruptcy and Insolvency Act to settle your unsecured debts for less than the full amount, or over an extended timeline of up to five years. It must be administered by a Licensed Insolvency Trustee, who is the only professional legally able to file one. Once filed, it triggers a stay of proceedings that stops collection calls, wage garnishments, and lawsuits from your unsecured creditors.
The core appeal is that you keep your assets. Unlike bankruptcy, a proposal does not require you to surrender non-exempt property, and there is no surplus-income calculation that raises your cost as your income rises. Instead you negotiate a single fixed monthly payment upfront. For employed homeowners and higher earners, this predictability often makes a proposal cheaper and less disruptive than bankruptcy.
To file a standard consumer proposal, your total unsecured debt — credit cards, lines of credit, personal loans, tax debt — must be under $250,000, excluding any mortgage on your principal residence. If you owe more, a Division I proposal is available but carries different, stricter creditor-voting rules and automatically leads to bankruptcy if creditors reject it. A Licensed Insolvency Trustee will confirm which stream applies to you.
Affordability is the second test. A proposal only works if you can make the agreed payment reliably; missing three months' payments annuls the proposal and lets creditors resume collection. This is why income stability matters so much. Creditors accept a proposal when it offers them more than they would recover in your bankruptcy, so the trustee first estimates that bankruptcy outcome and builds an offer that beats it — often 25% to 50% of the total owed, though the figure varies widely with your assets and income.
After filing, creditors have 45 days to vote. The proposal is accepted if creditors holding a simple majority of the dollar value of proven claims vote in favour, and once accepted it binds all unsecured creditors, even those who voted against it. If it is rejected, the trustee may amend and re-present it, or you may consider bankruptcy. Most proposals are accepted, often after minor negotiation.
A consumer proposal is noted on your credit report, generally for a shorter period than a bankruptcy, and completing it — along with the two mandatory financial counselling sessions — sets you up to rebuild credit sooner. Because eligibility, limits, and creditor expectations vary and change, treat this tool as a readiness check and let a Licensed Insolvency Trustee draft the actual offer.
Embed this free Proposal Readiness wizard on your law firm site — it runs in an iframe and includes a link back to LexScale.ai.
This tool provides general educational information about consumer proposals only — not legal, financial, or insolvency advice. Eligibility, limits, and creditor requirements change and depend on your circumstances. A consumer proposal can only be filed through a Licensed Insolvency Trustee; consult one before acting.
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