Consumer Proposal in Canada: How It Works, Costs, and What It Does Not Cover

A consumer proposal is a legally binding, court-supervised offer to pay your unsecured creditors part of what you owe, filed by a Licensed Insolvency Trustee under Part III, Division II of the federal Bankruptcy and Insolvency Act, available only if your total debts, not counting debts secured by your principal residence, do not exceed $250,000.

Information last verified on 2026-09-24. This article has not yet been reviewed by a licensed lawyer.

This article covers the federal law governing consumer proposals under the Bankruptcy and Insolvency Act (BIA), which applies the same way in every province and territory, including Quebec. It does not cover the personal bankruptcy process itself; see Bankruptcy in Canada for that. It does not cover which of your assets a province lets you keep if a proposal fails and you later become bankrupt; see Bankruptcy Exemptions in Canada by Province for that table. And it does not compare the two processes side by side; see Consumer Proposal vs. Bankruptcy in Canada for that comparison. For the rules Ontario adds on exemptions, credit reporting and garnishment, see Consumer Proposal and Bankruptcy in Ontario.

What a Consumer Proposal Is

A consumer proposal is a formal, negotiated compromise with your unsecured creditors, made under Part III, Division II of the BIA. Section 66.11 defines who can use it:

"consumer debtor means an individual who is bankrupt or insolvent and whose aggregate debts, excluding any debts secured by the individual's principal residence, are not more than $250,000 or any other prescribed amount." (Bankruptcy and Insolvency Act, s.66.11)

You do not file it yourself. Section 66.13(1)(a) requires a consumer debtor to commence proceedings through an administrator, and section 66.11 defines administrator to mean a trustee, or a person appointed or designated by the Superintendent of Bankruptcy. In practice that means a Licensed Insolvency Trustee prepares, files, and administers the proposal on your behalf. See Licensed Insolvency Trustees in Canada for how that licensing works and how to verify one.

Who Qualifies: The $250,000 Ceiling

The statutory default ceiling is $250,000 in total debts, not counting debts secured by your principal residence, unless a regulation prescribes a different amount. The ceiling is not limited to unsecured debt: a car loan, a secured line of credit or any other debt not secured by your home counts toward it. The OSB puts it in plain terms: "If your total debts are less than $250,000 (not including your mortgage), a consumer proposal may be the right choice for you." As of this article's verification date, no such regulation is in force. The consolidated Bankruptcy and Insolvency General Rules, current to September 3, 2026, contain no section prescribing a different figure, so $250,000 remains the operative ceiling.

A change is on the way, but it is not law yet. Canada Gazette, Part I, Vol. 159, No. 48 (November 29, 2025) proposed adding a new section 95.1 to the General Rules that would set the prescribed amount at $325,000. That notice was a pre-publication proposal open for public comment; it has not been registered as a final regulation in Canada Gazette Part II. The proposed regulation's own coming into force clause would also delay the $325,000 figure a further year past the date it is eventually registered. Do not treat $325,000 as current. If you are researching this later than the verification date above, check the General Rules' own "current to" banner and search for a Part II registration before relying on either figure.

If your debts, not counting debts secured by your principal residence, are above $250,000, a consumer proposal under Division II is not available to you. The Office of the Superintendent of Bankruptcy (OSB) notes that an individual in that position can instead file an ordinary Division I proposal, but with a materially different consequence if creditors reject it: a rejected Division I proposal results in automatic bankruptcy, while a rejected consumer proposal simply reverts you to your pre-proposal position with creditors.

How Long a Proposal Can Run

Section 66.12(5) sets a hard ceiling on the term:

"A consumer proposal must provide that its performance is to be completed within five years." (BIA, s.66.12(5))

Within that five year ceiling, the length of the proposal and the amount you pay are negotiated between you, your trustee, and your creditors, based on what you can afford and what your creditors are likely to accept.

How Creditors Accept a Consumer Proposal

Most consumer proposals are accepted without a creditors' meeting ever being held. Section 66.18(1) sets out deemed acceptance:

"Where, at the expiration of the forty-five day period following the filing of the consumer proposal, no obligation has arisen under subsection 66.15(2) to call a meeting of creditors, the consumer proposal is deemed to be accepted by the creditors." (BIA, s.66.18(1))

A meeting only becomes mandatory if the official receiver directs one, or creditors holding at least 25 percent of the value of proven claims request one within that 45 day window. If a meeting is called and there is no quorum, the proposal is also deemed accepted. When a meeting does go ahead and a vote is required, section 66.19(1) sets the threshold as an ordinary resolution voting all as one class, subject to the rights of secured creditors. A related creditor may vote against a proposal but not for it, and the administrator running the meeting cannot vote at all.

The Stay of Proceedings: What Freezes and What Does Not

Filing a consumer proposal triggers an automatic freeze on most unsecured collection action. Section 69.2(1) provides:

"...on the filing of a consumer proposal under subsection 66.13(2) ... in respect of a consumer debtor, no creditor has any remedy against the debtor or the debtor's property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy..." (BIA, s.69.2(1))

That is the provision that stops wage garnishment and collection calls on filing. It has three important limits. First, it does not apply if you filed a previous consumer proposal within the last six months, under section 69.2(2). Second, and more significantly, it does not protect you against a secured creditor. Section 69.2(4) is explicit that filing a consumer proposal does not prevent a secured creditor from realizing on or otherwise dealing with its security, unless a court orders otherwise, and any court ordered postponement is generally capped at six months. A mortgage lender or car loan lender who is not being kept current can generally continue enforcement on its own security regardless of the stay. Third, section 69.41(1) provides that the stay provisions "do not apply in respect of a claim referred to in subsection 121(4)", which covers child and spousal support owed under a court order or agreement, so a support garnishment or other support enforcement can continue after you file.

What a Consumer Proposal Does Not Compromise

A consumer proposal only binds the debts it is meant to bind, and two categories are worth understanding before you assume everything is covered.

Secured debt normally continues outside the proposal. Section 66.28(2) states that an accepted consumer proposal is binding on all unsecured claims, and on secured claims only where the secured creditor has filed a proof of claim under the ordinary secured claims process. A mortgage lender or car loan lender who is not filing a claim, the common pattern when you intend to keep making your regular payments, simply continues to be paid, or to enforce, under its own contract. The OSB's own consumer guidance corroborates this in plain language, describing debtors as keeping their assets so long as they keep making payments to their secured creditors.

Debts listed in section 178(1), including recent student loans, survive a consumer proposal unless it expressly compromises them. Section 66.28(2.1) of the BIA provides:

"A consumer proposal accepted, or deemed accepted, by the creditors and approved, or deemed approved, by the court does not release the consumer debtor from any particular debt or liability referred to in subsection 178(1) unless the consumer proposal explicitly provides for the compromise of that debt or liability and the creditor in relation to that debt or liability voted for the acceptance of the consumer proposal." (BIA, s.66.28(2.1))

Section 178(1) is the same list of debts a bankruptcy discharge does not release. It includes court fines and penalties, child and spousal support, debts from fraud or false pretences, and student loans under the Canada Student Loans Act, the Canada Student Financial Assistance Act or a provincial student loan enactment where you file before, or within seven years after, you stopped being a full or part time student (s.178(1)(g)). A proposal that does not expressly compromise such a debt, or that the creditor holding it did not vote for, leaves that debt owing.

Before filing, ask your trustee whether any of your debts fall under section 178(1), since those debts are not released the way ordinary unsecured debts are.

Missed Payments: The Deemed Annulment Rule

A consumer proposal can be lost if you fall behind, and the trigger is specific. Section 66.31(1) provides:

"...a consumer proposal is deemed to be annulled on (a) in the case when payments under the consumer proposal are to be made monthly or more frequently, the day on which the consumer debtor is in default for an amount that is equal to or more than the amount of three payments; or (b) in the case when payments under the consumer proposal are to be made less frequently than monthly, the day that is three months after the day on which the consumer debtor is in default in respect of any payment." (BIA, s.66.31(1))

Deemed annulment is more consequential than simply starting over. Section 66.32 provides that once a consumer proposal is annulled or deemed annulled, the debtor may not make another consumer proposal, and is not entitled to any relief under the stay of proceedings provisions until every claim for which a proof of claim was filed and accepted is either paid in full or extinguished. The same section revives every creditor's rights for the full amount of their claim, less any dividends they already received. In practice, a deemed annulled proposal can sometimes be automatically revived after 60 days if no creditor objects, or reinstated by court order, but neither outcome is guaranteed.

Mandatory Counselling

Every consumer proposal requires counselling, and the requirement is exactly two sessions, not three. OSB Directive No. 1R8, the directive currently in force, states:

"The counselling referred to in section 157.1 and paragraph 66.13(2)(b) of the Act shall consist of the following two sessions: (a) a first session to be conducted (i) between ten (10) and ninety (90) days following the date of the initial bankruptcy event or the filing of a consumer proposal; or (ii) within ten (10) days following the first meeting of creditors held pursuant to subparagraph 57 (c) (i) of the Act where a Division I Proposal was refused by the creditors; and (b) a second session to be conducted after a period of at least thirty (30) days following the first session, but prior to the discharge, in the case of an individual bankrupt, or of the issuance of the certificate of full performance, in the case of a consumer debtor." (OSB Directive No. 1R8)

A three session or ten session figure sometimes circulates, but that number describes a trainee counsellor's own supervised practice quota for becoming registered, not the consumer debtor's obligation. Refusing counselling can block the issuance of your certificate of full performance.

What a Consumer Proposal Costs

The fees an administrator can charge for a consumer proposal are fixed by regulation, not negotiated case by case. The current, in force tariff under the Bankruptcy and Insolvency General Rules is set out below.

The same pending Canada Gazette Part I proposal described above would raise these figures to $850 plus $850 for the filing and approval fees, and $120 individual or $35 group for counselling. That change is not in force, carries the same one year delay after registration described earlier, and has not been registered in Canada Gazette Part II as of this article's verification date. Treat the table above as current.

Effect on Your Credit Report

There is no single national number of years for how long a consumer proposal appears on your credit report, and none of the provincial consumer reporting statutes reviewed for this article names "consumer proposal" as its own category. The Office of the Superintendent of Bankruptcy offers a plain language rule of thumb rather than a citation to any specific law: it describes a consumer proposal as staying on your credit record for the length of the proposal term plus another three years.

The actual legal backstop is each province's general adverse information rule, the same catch all clause that governs any negative credit item once the specific bankruptcy clause does not apply.

A frequently repeated figure of a flat three years after a completed consumer proposal, sometimes seen on trustee marketing sites, has no located statutory basis in any of the provinces above. If you see it, treat it as industry practice at best, not a codified rule.

Verifying Who Can Legally File a Consumer Proposal

Only a Licensed Insolvency Trustee, or an administrator appointed or designated by the Superintendent of Bankruptcy, may file a consumer proposal. Section 13(1) requires anyone who wants to act as a trustee to apply to and be licensed by the Superintendent, and section 202(1)(a) makes it an offence, punishable by a fine of up to $5,000, imprisonment of up to one year, or both, for anyone who is not a licensed trustee to act as one or represent themselves as one. This is a genuine consumer protection concern in this space, since the search results for consumer proposals are dominated by trustee firm marketing and, separately, by unlicensed "debt consultants" the OSB has warned about. See Licensed Insolvency Trustees in Canada for how to check a trustee's licence and how to recognize the OSB's own scam warning signs.

This article provides general legal information about federal insolvency law. It is not legal advice, does not promise any specific reduction in your debt, and does not tell you whether a consumer proposal is the right choice for your situation. For that, speak with a Licensed Insolvency Trustee (the OSB notes that trustees typically do not charge for a first meeting) or a lawyer licensed in your province.

Disclaimer: This article provides general information about consumer proposals under the federal Bankruptcy and Insolvency Act, RSC 1985, c B-3, current as of September 2026. It is not legal advice and does not address every fact pattern. Figures tied to a pending regulatory change are not yet in force and should be checked against the current General Rules before you rely on them. Consult a Licensed Insolvency Trustee or a lawyer licensed in your province for advice on your specific situation.

Frequently Asked Questions

What is the current debt ceiling to qualify for a consumer proposal?

$250,000 in total debts, excluding debts secured by your principal residence, under BIA section 66.11. Other secured debts, such as a car loan, count toward the ceiling. A proposed regulation would raise this to $325,000, but it has not been registered in Canada Gazette Part II and, even after registration, would not take effect for a further year. Treat $250,000 as the current figure until an official update is confirmed.

How long can a consumer proposal last?

No more than five years, under BIA section 66.12(5). The exact term and monthly payment are set out in the proposal your Licensed Insolvency Trustee files and your creditors accept.

Does a consumer proposal stop wage garnishment?

Generally yes, for unsecured debt. Section 69.2(1) of the BIA stops creditors from starting or continuing collection action, including garnishment, once the proposal is filed. It does not stop enforcement of child or spousal support, which section 69.41 excludes from the stay, and it does not protect against a secured creditor enforcing its own security, such as a car loan lender repossessing a vehicle, unless a court orders otherwise.

What happens if I miss payments on my consumer proposal?

Falling behind by the equivalent of three payments (or three months if you pay less often than monthly) causes a deemed annulment under BIA section 66.31(1). Under section 66.32, this revives your creditors' full claims minus what they already received, and you cannot file another consumer proposal or regain the stay of proceedings until those revived claims are paid or otherwise resolved. A deemed annulled proposal can sometimes be automatically revived after 60 days if no creditor objects, or reinstated by court order.

Can student loans be included in a consumer proposal?

Only in limited cases. Under BIA section 66.28(2.1), a consumer proposal does not release a debt listed in section 178(1), which includes student loans where you file before, or within 7 years after, you stopped being a student, unless the proposal expressly compromises that debt and the student loan creditor voted to accept the proposal. Student loans outside that 7 year window are not in section 178(1)(g) and are treated like other unsecured claims.

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

There is no single national figure in law. The Office of the Superintendent of Bankruptcy describes a consumer proposal as staying on your credit record for the length of the proposal plus another three years, as general guidance rather than a statutory rule. The actual statutory backstop is each province's general adverse information rule, since none of the provincial statutes reviewed names a consumer proposal specifically: 7 years in Ontario and Quebec, 6 years in British Columbia, Alberta, Manitoba, Saskatchewan, Nova Scotia and New Brunswick. Newfoundland and Labrador has no general catch all clause, but bars unfavourable personal information older than 7 years.

Who is allowed to file a consumer proposal for me?

Only a Licensed Insolvency Trustee, or an administrator appointed or designated by the Superintendent of Bankruptcy, may file a consumer proposal under BIA sections 66.11 and 66.13(1)(a). Acting as a trustee without a licence is a separate offence under section 202(1)(a). See Licensed Insolvency Trustees in Canada for how to verify a trustee's licence.