Consumer Proposal in Canada: What It Costs and When It Fails

A consumer proposal is a legal deal to pay your creditors part of what you owe, over up to five years, set up and run by a licensed insolvency trustee. Once it’s filed, interest stops, and so do collection calls, lawsuits and wage garnishments. If creditors holding most of the debt accept it, it binds all of them, and you keep your car and your home as long as you keep paying any loans secured on them.

Below is what it costs, which debts it leaves out, how long it stays on your credit report, and what happens if you miss payments.

What is a consumer proposal, and who can file one?

A consumer proposal is a formal offer to your creditors under the federal Bankruptcy and Insolvency Act (opens in a new tab). You offer to repay a share of your unsecured debt, or all of it over more time, in payments that end within five years. You can file one if you’re insolvent and owe $250,000 or less, not counting the mortgage on your home.

Insolvent has a specific meaning here. You owe at least $1,000, and either you can’t keep up with your bills as they come due, or everything you own wouldn’t cover what you owe.

Only a licensed insolvency trustee can set one up and file it, and the Office of the Superintendent of Bankruptcy (OSB) says the first consultation is usually free (opens in a new tab). You’ll also go to two counselling sessions on budgeting and credit during the proposal. They’re required, and if you skip them you won’t get the certificate that shows you finished.

Who files one

In the 12 months to July 31, 2026, Canadians filed 113,841 consumer proposals (opens in a new tab), about 312 a day, against 31,840 personal bankruptcies. Proposals are now 78% of personal insolvencies.

The OSB’s 2024 profile (opens in a new tab) of everyone who filed, by either route, found a median debt load of $53,997. The OSB lists loss of income as the top reason (45%), well ahead of medical reasons (20%) and a relationship ending (11%). The typical household took in $3,089 a month and spent $3,264, so it came up $175 short every month.

What happens after you file?

Collection stops the day your trustee files. Creditors can’t start or continue a lawsuit or a wage garnishment over the debts in the proposal, and no more interest is added to them. Your creditors then have 45 days to respond (opens in a new tab). If none of them force a vote, the proposal is accepted automatically.

A garnishment already taking part of your pay stops too (the mechanics are in how wage garnishment works in Canada), with one exception: a garnishment for child or spousal support keeps going (opens in a new tab). If a collection agency calls about one of the included debts after you’ve filed, give it your trustee’s name. What a collector can and can’t do before you file depends on your province.

What your lender, your employer and the power company can’t do

The Act also protects you in a few other ways:

• Lenders can’t cancel an agreement (opens in a new tab), or demand the whole balance at once, only because you filed or because you’re insolvent. That covers a car loan you’re keeping up with.
• Utilities can’t cut off your service because you filed, or over a bill from before you filed.
• Employers can’t fire, suspend or discipline you (opens in a new tab) because you filed a proposal.

How much does a consumer proposal cost?

You pay what the proposal says and nothing on top of it. The trustee’s fees are set by federal rules and taken out of the payments you make, so every trustee in Canada charges the same amounts. What changes from person to person is the size of the offer, which depends on your income, what you own and what your creditors will accept.

The fees every trustee works from

These are the amounts in the Bankruptcy and Insolvency General Rules (opens in a new tab), plus sales tax on the trustee’s share:

The OSB also takes a 5% levy (opens in a new tab) from what your creditors receive. All of it comes out of your proposal payments, so it lowers what creditors get rather than raising what you pay.

Those amounts may change. In draft rules published in November 2025 (opens in a new tab), the government estimated that a trustee earns about $4,000 on an average consumer proposal, in 2022 dollars. The draft would raise the two flat fees to a maximum of $850 each and the counselling fee to a maximum of $120 a session, lift the debt limit from $250,000 to $325,000, then index all of them to inflation. The rules hadn’t been made final when we checked in September 2026, and the new fees and limit would start one year after the final rules are adopted.

What $40,000 of debt costs, four ways

Say you owe $40,000 on credit cards and loans and want it gone in five years. How much you end up paying depends heavily on the route. The proposal row assumes an offer of 30 cents on the dollar, which is only an example, since yours depends on your income and what you own.

The first three routes pay back every dollar you borrowed. A debt management plan usually goes through a non-profit credit counsellor, and the interest relief only applies to creditors who agree to it. A proposal is the only one of the four that cuts what you owe, because it’s the only one filed under insolvency law. The trade-offs are the credit report and missed-payment rules further down.

Creditors weigh your offer against what they’d likely get if you went bankrupt instead, so a proposal usually has to beat that to pass.

Don’t pay anyone to send you to a trustee

Only a licensed insolvency trustee can file a consumer proposal, and the trustee’s fees are the ones above. Since 2023 the OSB has been cracking down on unlicensed debt advisors (opens in a new tab), who can charge “hundreds or even thousands of dollars” before sending people to a trustee anyway. Its winter 2026 update (opens in a new tab) described one advisor whose advertised fees start at about $1,900, and reported that the share of insolvency filings with advice from a debt advisor fell from about 16% in 2023 to about 7% by the end of 2025.

You can check that someone is a licensed trustee in the OSB’s trustee search (opens in a new tab).

Which debts can go into a consumer proposal?

Most unsecured debts can: credit cards, lines of credit, bank and finance-company loans, payday loans, overdrafts, and income or sales tax owed to the CRA or Revenu Québec. What stays out is debt secured on something you’re keeping, like a car loan or a mortgage, plus a short list of debts the law won’t wipe out.

Tax debt goes in like any other, because the Act ranks federal and provincial government claims as unsecured (opens in a new tab) in a proposal. Recent student loans, support and fines are on a list of debts (opens in a new tab) that a proposal only settles if it names them and that creditor votes yes.

Giving the car back is also an option. If it’s surrendered or repossessed and sold, whatever you still owe after the sale becomes an unsecured debt that can go into the proposal.

How long does a consumer proposal stay on your credit report?

According to the Financial Consumer Agency of Canada (opens in a new tab) (FCAC), Equifax and TransUnion remove it three years after you’ve paid off everything in it, or six years after you signed it, whichever comes first. On a full five-year proposal, the six-year limit comes first, so it drops off about a year after your last payment.

Finishing within three years of signing is the only way to move that date. Sign in October 2026 and pay over five years, and it’s gone in October 2032. Finish in October 2028 instead, and it’s gone in October 2031. You can ask your trustee to write the proposal so that paying early carries no penalty (opens in a new tab).

For comparison, FCAC says a first bankruptcy stays for six years after your discharge (seven with TransUnion in Newfoundland and Labrador, Ontario, PEI and Quebec), and a debt management plan for two years after you finish it.

What happens to your credit cards

Cards with a balance owing are cancelled once they’re part of the proposal. The OSB says (opens in a new tab) you may be able to keep a card that had nothing owing when you filed, and that a secured card or a card with a small limit may be possible during the proposal.

When you finish, the OSB reports it to the credit bureaus, and its guide also suggests sending your certificate of full performance to Equifax and TransUnion yourself, to make sure your file is updated.

What happens if you miss a consumer proposal payment?

One late payment won’t end it automatically, but falling three payments behind will. On a monthly proposal, the day you’re behind by the equivalent of three payments, it’s deemed annulled (opens in a new tab) automatically, with no hearing. Your creditors can then go after the full balance again, minus whatever they’ve already been paid.

After an annulment, you can’t file another consumer proposal or get the same protection from collection until those debts are paid in full or wiped out in a bankruptcy, unless a court allows it (opens in a new tab). In a 2008 study funded by the OSB (opens in a new tab), 82% of the proposals that failed between 2002 and 2006 ended in this kind of automatic annulment.

Reviving it, or changing it before it fails

A deemed annulment isn’t always final. Within 30 days your trustee can send your creditors a notice, and if none of them object, the proposal is revived 60 days after it was annulled. The missed payments still have to be made up before the end, according to the OSB (opens in a new tab). A court can also revive one.

It’s easier to act before the third payment. If your income drops, your trustee can file an amended proposal with smaller payments or a longer term, up to the five-year limit, and your creditors vote on it again. Call the trustee after the first missed payment, not the third.

Can you save money during a consumer proposal?

Yes, and a small cushion is what protects the proposal. Money you set aside after you file stays yours. With one payment’s worth saved, you can still pay on time after a bad month, like a lost shift or a car repair, instead of starting to fall behind.

The usual advice to pay down debt before saving also changes inside a proposal. No interest is added to the debts in it, so setting money aside doesn’t cost you any interest. Outside a proposal, whether to pay down debt or save first is a closer call.

Lodavo is a free app that makes building that cushion more rewarding. Connect the savings or chequing account you already use, and every $25 in it earns a ticket in a weekly cash draw. Every week a user wins at least $100, and the top prize is $10,000. Your savings never leave your account.

Consumer proposal or bankruptcy?

A proposal usually suits someone with a steady income or something they want to keep, like a car or a home, since you keep everything and repay a share. Bankruptcy can cost less and end sooner when income is low and there’s little to protect. A first bankruptcy with no surplus-income payments ends in nine months (opens in a new tab).

Ask a trustee about both, even if you’ve made up your mind. In the same November 2025 review of the fee rules (opens in a new tab), the OSB wrote that the current fee structure “could be creating an environment where debtors are encouraged to take the consumer proposal route, even in cases where it is not in their best interest.”

The rows come from the OSB’s comparison (opens in a new tab) and FCAC’s guide to debt help (opens in a new tab). Which assets are exempt in a bankruptcy depends on your province.

Two options only some provinces have

Quebec: voluntary deposit. You deposit the seizable part of your income with the Court of Québec, which pays your creditors. Interest on the listed debts is capped at 5% (opens in a new tab), and while you keep depositing, creditors can’t seize your pay or sue you (opens in a new tab). You repay everything. The Quebec government’s guide (opens in a new tab) explains how to register.

Alberta, Saskatchewan, Nova Scotia and PEI: Orderly Payment of Debts. A court order combines your unsecured debts into one monthly payment at 5% interest (opens in a new tab), and the court pays your creditors from it. They can’t sue you over those debts while it runs. You repay everything here too. In Alberta the program is run by Money Mentors (opens in a new tab), a non-profit.

Both suit someone who could pay off the full balance at 5% interest.

The first conversation is usually free

If you’re weighing a proposal, a licensed insolvency trustee has to go through all of your options with you, including the ones that aren’t a proposal. Bring a list of what you owe and what you own, and ask about bankruptcy and a debt management plan by name. You can find a licensed trustee (opens in a new tab) near you through the OSB.

Once the plan is in place, saving a little each month is what keeps it on track. You can get Lodavo free on the Apple App Store (opens in a new tab) or the Google Play Store (opens in a new tab).

This article is general information, not legal advice. Your options depend on your province, your income and what you own, so talk to a licensed insolvency trustee before you decide.

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