How does a consumer proposal protect your house?
A consumer proposal is a formal debt relief option for people struggling with debt. It allows them to reach an agreement with their creditors under the rules of the Bankruptcy and Insolvency Act. You repay part of your unsecured debt for up to five years, and your creditors forgive the rest.
The key difference from bankruptcy is simple. You keep everything you own in a consumer proposal.
In a bankruptcy, your assets vest with the trustee and provincial exemptions determine what you’re allowed to keep. A consumer proposal works the other way around.
You make an offer to your creditors that is more than what they’d receive if you went bankrupt, and as long as they accept it, nothing gets seized. Your house, car, savings and tax refunds are all protected.
In 2025, 140,457 Canadians filed for insolvency. Consumer proposals accounted for roughly 78% of those filings, the highest volume in 16 years.
Homeowners with equity are a big part of that number. A consumer proposal protects property that would otherwise need to be dealt with in a bankruptcy, and it does so without selling anything or borrowing against your home.
You can learn more about what assets you can keep in a consumer proposal.
Source: Government of Canada – Bankruptcy and Insolvency Act, Part III, Division II
How does home equity affect your consumer proposal offer?
Your consumer proposal offer must exceed what creditors would receive in a bankruptcy. Home equity is the single biggest factor in that calculation for most homeowners.
Your Licensed Insolvency Trustee starts by calculating the net equity in your home. That’s the current market value, minus the mortgage balance, minus estimated selling costs such as real estate commissions and legal fees.
From that net equity figure, the trustee subtracts your province’s home equity exemption. What’s left is the non-exempt equity, and your consumer proposal offer must exceed that amount.
Each province sets its own exemption.
| Province | Home equity exemption | Governing legislation |
|---|---|---|
| Ontario | $12,997 | Execution Act, O. Reg. 657/05 |
| Alberta | $40,000 | Civil Enforcement Act, RSA 2000, c. C-15 |
| British Columbia (Metro Vancouver and Capital Regional District) | $12,000 | Court Order Enforcement Act, RSBC 1996, c. 78 |
| British Columbia (elsewhere) | $9,000 | Court Order Enforcement Act, RSBC 1996, c. 78 |
| Saskatchewan | $50,000 | Enforcement of Money Judgments Act, SS 2010, c. E-9.22 |
Source: Government of Ontario – Execution Act, O. Reg. 657/05, Government of Alberta – Civil Enforcement Act, RSA 2000, c. C-15, Government of British Columbia – Court Order Enforcement Act, RSBC 1996, c. 78 and Government of Saskatchewan – Enforcement of Money Judgments Act, SS 2010, c. E-9.22
If you live in Alberta and have $40,000 in non-exempt equity, your consumer proposal offer must exceed $40,000 for creditors to accept it.
In Ontario, with the same equity but only a $12,997 exemption, the bar is higher. The province you live in directly affects how much you pay.
Worked example for Ontario
Say your home is worth $500,000. You owe $430,000 on the mortgage. Estimated selling costs, including real estate commission and legal fees, come to roughly $30,000. That leaves net equity of $40,000.
Ontario’s exemption is $12,997. Subtract that from $40,000, and you get $27,003 in non-exempt equity. Your consumer proposal offer to creditors must exceed $27,003 for them to accept it. If you also have surplus income or other non-exempt assets, the trustee factors them in as well.
Source: Ontario Regulation 657/05, s. 1(2), as amended by O. Reg. 393/25
What happens to your mortgage during a consumer proposal?
A consumer proposal only covers unsecured debt. Your mortgage is a secured debt backed by your home, so it’s excluded entirely. You keep making your regular mortgage payments as if the consumer proposal doesn’t exist.
Section 66.34 of the Bankruptcy and Insolvency Act goes further. It prevents your lender from changing the terms of your mortgage, calling your loan, or taking any action against you just because you filed a consumer proposal. The filing alone isn’t grounds for the lender to take any action.
That legal protection is one of the reasons a consumer proposal works well for homeowners. You deal with the unsecured debt, credit cards, lines of credit and tax debts. Your mortgage carries on untouched.
You do need to keep your property taxes current. Most mortgage agreements require it, and municipalities can pursue a tax sale for unpaid property taxes regardless of your consumer proposal.
By clearing the unsecured debt, you’re in a better position to keep up with the mortgage, not a worse one.
Source: Government of Canada – Bankruptcy and Insolvency Act, s. 66.34
Can you renew or refinance your mortgage during a consumer proposal?
Most lenders renew an existing mortgage during a consumer proposal without issue, provided you’ve been keeping up with your payments. And it makes sense when you think about it. A renewal isn’t the same as applying for a brand new mortgage. The lender already holds the mortgage and already has a relationship with you. It’s a far simpler process.
Could a lender nudge the rate up slightly because of the hit to your credit? It’s possible. But it doesn’t happen often, and even when it does, the difference is typically minimal.
Refinancing is harder. A consumer proposal shows on your credit report as an R7 rating, and lenders who don’t already hold your mortgage are less likely to approve a new loan with that on file. Switching to a different lender during the consumer proposal is difficult for the same reason.
Some homeowners use a mortgage refinance to pay off the consumer proposal early. If your equity has grown and your income supports the new payments, this is worth discussing with your trustee and a mortgage broker. Paying off the consumer proposal early means the notation on the credit report clears faster.
You can learn more about getting a mortgage with a consumer proposal.
As of 2025, both Equifax Canada and TransUnion Canada remove a consumer proposal from your credit report three years after you complete it, or six years after you filed it, whichever comes first. If you complete a five-year consumer proposal on time, the record disappears one year later. Pay it off in two years, and the record clears in five.
You can learn more about how a consumer proposal affects your credit report.
Source: Financial Consumer Agency of Canada – How Long Information Stays on Your Credit Report
What if you have a HELOC or second mortgage?
A home equity line of credit (HELOC) and a second mortgage are both types of secured debts tied to your property. These debts are not included in a consumer proposal, so you must continue making payments on them just as you do with your first mortgage.
Here’s the thing, though. A HELOC and a second mortgage reduce your net equity. When your trustee calculates the equity in your home, all secured debts against the property are subtracted from the market value.
If you choose to surrender the property rather than keep it, any shortfall after the secured debts are paid would be treated as unsecured debt in the consumer proposal.
If you owe $350,000 on a first mortgage and $50,000 on a HELOC against a $450,000 home, your equity is $50,000 before selling costs, not $100,000. That lower equity figure means a lower minimum offer in the consumer proposal. So while secured debts aren’t part of the consumer proposal itself, they affect what the consumer proposal costs you.
What if you co-own your home?
If you co-own your home with a spouse or partner, only your share of the equity goes into the consumer proposal calculation. Your co-owner’s share isn’t touched.
Say you and your spouse own a home 50/50. The total equity is $80,000, so your share is $40,000. Your co-owner’s $40,000 stays out of it entirely.
Their credit isn’t affected, and their equity is protected. The consumer proposal calculation only considers what would happen to your half in a bankruptcy.
If both co-owners need to file, you can each file separately or file a joint consumer proposal under section 66.13(3) of the Bankruptcy and Insolvency Act. A joint filing combines both debts and assets into one proposal, which is simpler and usually cheaper. One person filing doesn’t mean the other has to.
You can learn more about how bankruptcy and a consumer proposal affect your spouse.
Source: Government of Canada – Bankruptcy and Insolvency Act, s. 66.13(3)
What happens if you are behind on mortgage payments?
A consumer proposal stops unsecured creditors, but it doesn’t stop a mortgage lender from enforcing a secured debt. If you’re behind on your mortgage, the lender can still pursue power of sale or foreclosure, depending on your province.
Ontario is a power of sale province. The lender can sell the property without going to court, though there are notice requirements under section 32 of the Mortgages Act. British Columbia is a foreclosure province, where the lender goes through the Supreme Court to take ownership.
Either way, the consumer proposal doesn’t prevent it.
Source: Government of Ontario – Mortgages Act, R.S.O. 1990, c. M.40
If you’re behind on mortgage payments and also drowning in unsecured debt, there are two common approaches.
You can catch up on the arrears before or during the filing, or you can sell the home, use the proceeds to pay the mortgage, and include any shortfall as an unsecured debt in the consumer proposal. A Licensed Insolvency Trustee walks through both options with you during the free consultation.
The worst move is doing nothing. If you’re struggling with both the mortgage and unsecured debts, deal with the unsecured side first. Clearing those payments frees up cash to stay current on the mortgage.
Have questions about debt?
Talk to a Licensed Insolvency Trustee. It’s free and confidential.
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Frequently asked questions
Can I keep my house if I file a consumer proposal?
Yes. A consumer proposal protects all your assets, including your home. You don’t surrender anything to your creditors. Your Licensed Insolvency Trustee structures the consumer proposal offer so it’s more than what creditors would recover in a bankruptcy, and you keep the house.
Does a consumer proposal affect my mortgage?
A consumer proposal doesn’t touch your mortgage. Your mortgage is a secured debt and is excluded from the consumer proposal entirely. The Bankruptcy and Insolvency Act prevents your lender from changing your mortgage terms because you filed for bankruptcy.
How much home equity can I have in a consumer proposal?
There’s no limit on home equity in a consumer proposal. The equity affects the size of the offer, not whether you qualify. More equity means a higher minimum offer to creditors, because the consumer proposal has to beat what they’d get in a bankruptcy.
Will my mortgage lender know about my consumer proposal?
Your mortgage lender is not notified directly. A consumer proposal is a public record filed with the Office of the Superintendent of Bankruptcy, so it’s possible the lender can find out. Your mortgage payments and terms are unaffected, and the lender has no reason to take action.
Can I sell my house during a consumer proposal?
Yes. You’re free to sell your home at any time during a consumer proposal. The proceeds go to paying off your mortgage, and any remaining equity is yours. Selling doesn’t affect your consumer proposal payments because your creditors have already accepted the offer.
What if my home equity increases during my consumer proposal?
Your consumer proposal is based on the equity at the time of filing. If your home goes up in value during the consumer proposal, that extra equity stays with you. Creditors can’t reopen the consumer proposal to claim more money. This is another advantage over bankruptcy, where increases in home equity during the process are taken into account.
Is a consumer proposal better than bankruptcy for homeowners?
For most homeowners with equity, yes. In a bankruptcy, non-exempt equity in your home either goes to the trustee or the home is sold. As of December 19, 2025, Ontario protects only $12,997 of home equity.
A consumer proposal protects all your equity, regardless of the amount, allowing you to structure a payment plan instead of risking the property.
Can I buy a house while in a consumer proposal?
You can, but getting a mortgage while an R7 rating is on your credit report is difficult. Most lenders want to see the consumer proposal completed first.
Some alternative lenders or B lenders will consider an application during the consumer proposal, but at higher interest rates. Completing the consumer proposal early and rebuilding credit improves your chances.
Learn more about your mortgage options during a consumer proposal.
Talk to a Licensed Insolvency Trustee about your home
If you own a home and you’re carrying unsecured debt you can’t keep up with, a consumer proposal is worth looking at.
A Licensed Insolvency Trustee can calculate your home equity, determine your provincial exemptions, and structure a consumer proposal that protects your property.