If you’re struggling with unsecured debt and researching the best way to get on top of things, a consumer proposal could be a viable solution. This formal debt relief option allows you to repay a portion of your debt over time, and write off the rest, while being legally protected from creditors.
In this article, we’ll discuss how a consumer proposal works in Newfoundland and Labrador, the eligibility criteria involved, and how it can help you regain control of your finances if you find yourself unable to repay what you owe.
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What is a consumer proposal?
A consumer proposal is a formal debt solution regulated by the federal government under the Bankruptcy and Insolvency Act. It allows individuals who are struggling with unsecured debt to work with a Licensed Insolvency Trustee (LIT) to set up a repayment program.
This repayment program offers creditors a portion of the total debt, paid via a series of affordable monthly payments. Unlike bankruptcy, consumer proposals allow you to keep your assets and avoid more severe credit consequences.
How does a consumer proposal work?
A consumer proposal is a legally binding agreement between you and your creditors. Here’s how the setup process typically works:
Get a free consultation with a Licensed Insolvency Trustee
Your first step is to book a free, no obligation consultation with a Licensed Insolvency Trustee (LIT). LITs are federally regulated professionals who are legally qualified to administer consumer proposals.
During this initial meeting, they’ll assess your financial situation, explain your debt relief options, and help you decide if a consumer proposal is right for you.
Reduce your debt by up to 80%
- Licensed Insolvency Trustees
- In-person, phone or video
- 75 offices across Canada
File a consumer proposal
If you decide to proceed, your LIT will help you draft and officially file the proposal. This includes offering your creditors a portion of what you owe in exchange for full debt forgiveness on the remaining balance.
Once the proposal is filed, all collection activity — including calls, wage garnishments, and interest accumulation — should stop immediately.
Make your monthly payment
If the majority of your unsecured creditors (by dollar value) accept the proposal, you’ll begin making monthly payments based on the agreed terms — typically over a period of up to five years. These payments are fixed and interest-free.
At the end of your repayment term, any remaining debt can be written off. With a consumer proposal, it’s possible to find relief on 70-80% of your total unsecured debt.
Gradually repair your credit rating
While your credit rating will be temporarily affected, completing the proposal helps you rebuild your credit rating over time. You’ll also attend two mandatory financial counselling sessions to help you manage money better and avoid future debt problems.
Am I eligible for a consumer proposal in Newfoundland and Labrador?
To be eligible for a consumer proposal, you must meet the following criteria:
- Live in Canada (your principal residence, or business, must be in Canada)
- Owe no more than $250,000 in unsecured debts (excluding your mortgage)
- Have a stable source of income to make regular proposal payments
- Be unable to repay debts in full, but able to repay a portion over time
- Secured debts like car loans or mortgages are not included — you must continue those payments separately
Will using a consumer proposal make me debt free?
If you complete your consumer proposal successfully, you will be legally released from the unsecured debts included in the agreement. This means you’ll be free from credit cards, personal loans, payday loans, and other eligible debts.
It’s important to note that secured debts like a mortgage or car loan must be paid separately.
Debt Solution Finder
How do debt solutions impact your credit?
Most formal debt solutions, including consumer proposals and bankruptcy, will appear on your credit report and lower your credit score in the short term.
A consumer proposal typically stays on your report for three years after completion, or six years from the date you filed (whichever comes first), while bankruptcy can remain for up to seven years.
However, by addressing your debts and making regular payments, you can show lenders you’re serious about rebuilding. Over time, you can repair your credit and regain financial stability through better habits and responsible borrowing.
Alternative debt relief options in Canada
If you’re struggling with debt, a consumer proposal isn’t your only option. There are several debt relief solutions to help you regain control of your financial situation.
Debt consolidation
Debt consolidation involves combining multiple debts—like credit cards, personal loans, and lines of credit—into a single monthly payment, usually through a debt consolidation loan.
This tactic can lower your interest rate and simplify the repayment process. It’s especially useful if you’re only making minimum payments on your credit card and can’t seem to make progress.
Credit counselling
A credit counselling agency can help you better understand your financial situation and develop a customized debt management plan.
Through counselling, you can receive budgeting advice, financial education, and possibly negotiate lower interest rates with creditors. This option is useful for people who may be able to pay off their debts in full but need help organizing their finances first.
Personal bankruptcy
For individuals overwhelmed by debt and unable to meet their financial obligations, filing for bankruptcy might be the most realistic solution.
It’s a legal process administered under the Bankruptcy and Insolvency Act, designed to give you a fresh financial start. While it does affect your credit rating, bankruptcy can release you from most unsecured debts and stop collection actions.
Is a consumer proposal the best way to get debt help?
If you’re facing financial difficulty and struggling to repay your unsecured debts, a consumer proposal may be one of the best debt relief options available. It allows you to avoid bankruptcy while reducing the total amount you owe, and turns your debts into one affordable monthly payment.
Unlike informal repayment plans like credit counselling, a consumer proposal is legally binding under federal law, offering protection from collection calls and legal action. While it does affect your credit in the short term, it can be a useful tool for working towards your financial recovery.
