If you’re struggling with unmanageable debt in Nova Scotia, a consumer proposal might be the solution to help you regain control of your finances. This formal, legal process allows you to pay off a portion of your debt over time, potentially avoiding bankruptcy.
A consumer proposal can simplify your debt repayment and protect you from creditor actions, like legal proceedings or collection calls.
In this article, you’ll learn how this process works, whether you qualify, and how to get started with the help of a Licensed Insolvency Trustee. Nova Scotia residents can begin their journey to financial recovery with the right support.
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What is a consumer proposal?
A consumer proposal is a legally binding debt relief option governed by the Insolvency Act. It allows you to deal with unmanageable debt without filing for bankruptcy. If you’re overwhelmed by missed payments and struggling to keep up with what you owe, a consumer proposal may be a practical alternative.
The arrangement involves working with a Licensed Insolvency Trustee to offer your creditors a portion of what you owe, usually with reduced monthly payments over a period of up to five years. Once your creditors agree, you stop paying interest and make only the agreed-upon payments.
This arrangement protects you from wage garnishments, legal action, and collection calls. A consumer proposal also allows you to keep your assets while committing to a manageable repayment plan.
It’s a structured way to regain control of your finances, and for many in Nova Scotia, it’s a path toward financial recovery without the lasting consequences of bankruptcy.
How does a consumer proposal work?
A consumer proposal works by consolidating your unsecured debts into one single monthly payment that fits your budget. It’s designed to reduce the total amount you owe while freezing interest and stopping collection efforts.
The process begins when you meet with a Licensed Insolvency Trustee (LIT), who reviews your finances and helps you draft a proposal. This proposal is then sent to your creditors, offering to repay a portion of the debt over a period of up to five years.
If the majority of your creditors (by dollar value) agree, the proposal becomes legally binding. You’ll make just one monthly payment to the LIT, who distributes the funds to your creditors. As long as you maintain payments, this approach offers structure, predictability, and protection from legal action while you deal with your debts.
Do I qualify for a consumer proposal?
To qualify for a consumer proposal, you must be facing financial challenges that make it difficult to repay your debts in full. Nova Scotia residents are eligible to file a consumer proposal if they owe more than $1,000 but less than $250,000 (excluding mortgages on a principal residence). You must also be insolvent—this means you’re unable to pay your debts as they become due.
A consumer proposal is best suited for people with unsecured debts, including:
- Credit card balances
- Personal loans
- Income tax debt
- Payday loan debt
It is not designed to deal with secured debts, like car loans or mortgages, so you’ll be expected to pay for these alongside your consumer proposal
You must have a stable source of income that allows you to make regular monthly payments. While your credit history will be considered, even people with poor credit can qualify if they demonstrate the ability to meet the agreed-upon payment terms.
Before filing, you’ll need to meet with a Licensed Insolvency Trustee, who will assess your situation and confirm whether a consumer proposal is the right option for you. They will ensure the proposal is fair and affordable based on your income, assets, and overall debt load.
How do you set up a Nova Scotia consumer proposal?
Setting up a consumer proposal in Nova Scotia is a structured, legally supported process designed to help you manage your debt problems and avoid bankruptcy. Here’s how the process works from start to finish:
Contact a Licensed Insolvency Trustee
Your first step is to reach out to a Licensed Insolvency Trustee (LIT)—the only professionals in Canada authorized to file consumer proposals.
These debt professionals will assess your financial situation, explain your debt relief options, and help determine whether a consumer proposal is the right fit for you.
You can connect with a trustee at the Farber Nova Scotia office for a free consultation, where you’ll receive confidential advice and a clear picture of your debt relief options.
Turn your debts into one manageable monthly payment
If a consumer proposal is the best solution for your financial circumstances, your trustee will help you calculate a reasonable monthly payment based on your income, assets, and living expenses. The amount you pay towards your consumer proposal depends on what you can afford, not on the total amount you owe.
Your debts will be consolidated into a single monthly payment that’s easier to manage and often significantly lower than what you’re currently paying.
File the consumer proposal
Once a plan is created, your LIT will officially file the consumer proposal with the federal government. The proposal outlines how much you are offering to repay and over what period (up to five years).
It’s then submitted to your creditors for review. This is the official start of the process and puts you on the path toward financial recovery.
Wait for creditors to vote on proposal
After filing, you offer creditors the chance to accept or reject your offer – they have 45 days to do so. If the majority (in dollar value) agree, the proposal becomes a legally binding process for all.
Once accepted, interest charges on your debts and legal actions from creditors, including collection calls, wage garnishments, and lawsuits, must stop.
Complete your debt payments
Over the agreed term—typically up to five years—you’ll make consistent monthly payments. These payments are made to your LIT, who distributes the funds to your creditors.
You’ll also be required to attend two financial counselling sessions to help you build better money management skills and avoid future debt problems.
Discharge from consumer proposal
When all payments and counselling sessions are complete, you’ll receive a certificate of full performance—your official discharge from the consumer proposal. At this point, you are no longer responsible for the remaining balance of the debts included in the proposal.
Rebuild credit and work towards a debt-free future
After your discharge, you can begin the process of rebuilding your financial life. You’ll see improvements to your credit over time, especially if you manage new credit products responsibly.
By completing a consumer proposal, you’re taking an important step to avoid bankruptcy, eliminate unsecured debt, and move toward a more stable and debt-free future.
How does a consumer proposal impact my credit?
Filing a consumer proposal in Nova Scotia will affect your credit report, but the impact is generally less severe than a bankruptcy. Once your proposal is officially filed, it will be noted on your credit file as an R7 rating—this indicates that you’ve made an arrangement to settle your debts over time, rather than in full.
This rating will remain on your credit report for up to three years after you’ve completed the proposal, or six years from the date you filed, whichever comes first. During this time, you may find it more difficult to qualify for credit products, such as new credit cards, personal loans, or mortgages.
However, a consumer proposal also provides a structured path to improve your credit over time. By consistently making your monthly payments and attending mandatory financial counselling sessions, you demonstrate financial responsibility—setting the stage for future credit recovery.
Will a consumer proposal pay off all my debts?
A consumer proposal only covers unsecured debts, such as credit card balances, payday loans, personal loans, and income tax debt. These are debts that are not tied to an asset like a house or vehicle.
If you have secured debts—like a car loan or mortgage—those are not included in the proposal. You must continue making regular payments on those if you want to keep the asset.
The amount you repay through a consumer proposal depends on your total debt, income, and what your creditors are likely to accept.
The proposal helps you regain control by consolidating your unsecured debts into one manageable monthly payment, often significantly lower than what you currently owe—allowing you to work toward financial independence without resorting to bankruptcy.
Alternative debt relief options
If a consumer proposal doesn’t fit your needs, there are other debt solutions available in Nova Scotia that can help you regain control of your finances. Each comes with its own pros and cons, depending on your financial goals, income, and type of debt.
Credit counselling
Credit counselling involves working with a certified credit counsellor to assess your financial situation and build a strategy to improve it. These counsellors help you create a budget, provide debt education, and may offer a formal debt solution that consolidates your unsecured debts into one monthly payment.
Debt consolidation
If you’re struggling with multiple debts in Nova Scotia, debt consolidation could help. With debt consolidation, you take out a new loan to pay off multiple existing debts. This simplifies your financial life by replacing multiple payments with one monthly payment. If you qualify for a lower interest rate, this can save you money over time.
Consolidation loans are typically available through banks or credit unions and are best suited for those with a stable income and decent credit. It doesn’t reduce your total debt but can make managing multiple debts easier.
Personal bankruptcy
Personal bankruptcy is a legal process for people with overwhelming debt and few alternatives. It can eliminate most unsecured debts and offer a fresh financial start, but it comes with long-term consequences for your credit.
Bankruptcy may be the right choice if you don’t have enough income to support a repayment plan or have no significant assets you need to protect.
Debt Management Plan
A debt management plan is an informal debt solution that consolidates your debts into one monthly payment that fits your budget, subject to the agreement of your creditors.
While interest rates may be reduced, you still repay the full amount you owe. It’s a good option for people who need guidance and are committed to long-term financial stability.
Is a consumer proposal in Nova Scotia my best route to financial freedom?
If you’re feeling overwhelmed by debt, a consumer proposal could be the structured and manageable solution you need. This formal agreement can reduce what you owe and give you more time to repay your debts—without losing your assets or resorting to bankruptcy.
Your local Licensed Insolvency Trustee can review your financial situation and help you explore your best options. Every case is different, and what works for one person may not be the right path for another.
Booking a free initial consultation with Farber could help. Your zero-obligation consultation gives you the opportunity to ask questions, understand your choices, and decide whether a consumer proposal is your most effective route to financial freedom.