Filing a Consumer Proposal in Ontario

What is a consumer proposal?

A consumer proposal is a legal agreement between you and your creditors, filed under the federal Bankruptcy and Insolvency Act. You offer to repay a portion of your unsecured debt over a period of up to five years. Your creditors forgive the rest.

Only a Licensed Insolvency Trustee can file one. The trustee reviews your income, expenses, assets, and debts, then prepares a repayment offer that your creditors are likely to accept. Once it is filed, interest stops, collection calls end, and any wage garnishments are lifted.

The rules come from federal legislation, so a consumer proposal works the same way whether you live in Toronto, Ottawa, or Thunder Bay. Most people don’t know this option exists until they are already behind on payments.

Who qualifies for a consumer proposal in Ontario?

A consumer proposal is open to anyone in Ontario who meets three conditions under the Bankruptcy and Insolvency Act. You must owe between $1,000 and $250,000 in unsecured debt, excluding the mortgage on your primary residence.

You must be insolvent, meaning you cannot pay your debts as they come due. And you must be a Canadian resident or have property or a business connection in Canada.

Source: Government of Canada – Bankruptcy and Insolvency Act, Section 66.12

If you and your spouse are filing together, a joint consumer proposal can cover combined unsecured debt of up to $500,000. If your debt exceeds $250,000 on your own, you don’t qualify for a consumer proposal, but you can file a Division I proposal, which has no debt ceiling.

How does the consumer proposal process work step by step?

Step 1: Initial consultation

A consumer proposal starts with a free consultation with a Licensed Insolvency Trustee. The trustee reviews your full financial picture, including income, monthly expenses, assets, and every debt you owe. If a consumer proposal is a sensible route, the trustee prepares the offer.

Step 2: Filing and creditor voting

The trustee files the consumer proposal with the Office of the Superintendent of Bankruptcy. From that day, interest stops, and a stay of proceedings protects you from creditors.

Your creditors then have 45 days to accept or reject the proposal. If no creditor holding at least 25% of the debt requests a meeting, the proposal is automatically accepted.

Source: Government of Canada – Bankruptcy and Insolvency Act, Section 66.18

Step 3: Payments and completion

You make fixed monthly payments to the trustee, who distributes the funds to your creditors. You also complete two mandatory financial counselling sessions.

When your final payment is made, the trustee issues a certificate of full performance, and the remaining debt is legally forgiven.

How much does a consumer proposal cost in Ontario?

A consumer proposal has no upfront fees. The trustee’s compensation is set by a federal tariff under the Bankruptcy and Insolvency Act and is deducted from the payments you already make under the proposal. Your creditors, not you, effectively absorb the cost.

The tariff works like this: the trustee receives $750 upon filing and $750 upon court approval, and then 20% of each dollar distributed to creditors. Two counselling sessions and a government filing fee are also covered from your payments.

Source: Government of Canada – Bankruptcy and Insolvency General Rules, Section 129

You repay only a portion of your total unsecured debt for up to five years. The exact amount depends on your income, your assets, and what your creditors would receive in a bankruptcy.

How does a consumer proposal affect your credit score?

Accounts included in a consumer proposal are given a rating of 7 on your credit report, such as R7 for revolving credit or I7 for installment loans. For context, a rating of 1 is the best and 9, which is assigned in bankruptcy, is the worst.

A rating of 7 tells lenders that you have made a formal arrangement to repay your debts.

Source: Equifax Canada – Consumer Credit Report User Guide

Both Equifax and TransUnion remove the consumer proposal from your credit report three years after you complete it or six years after you file it, whichever comes first. If you finish a five-year proposal on time, the record disappears one year later. Pay it off in two years, and it is gone in five.

Source: Financial Consumer Agency of Canada – How Long Information Stays on Your Credit Report

You can start rebuilding your credit before the proposal is removed from your report. A secured credit card, used responsibly, is the most common way to begin.

What is the difference between a consumer proposal and bankruptcy in Ontario?

A consumer proposal and bankruptcy both fall under the Bankruptcy and Insolvency Act, but they work differently. The table below breaks down the main differences for Ontario residents.

	Consumer proposal	Bankruptcy
Assets	You keep everything	Non-exempt assets are surrendered
Typical repayment	20-70% of your total unsecured debt	Varies based on surplus income and assets
Duration	Up to 5 years	9 to 21 months (first bankruptcy)
Surplus income	Not applicable	Extends bankruptcy to 21 months and increases cost
Credit report rating	7 (e.g. R7, I7)	Extends bankruptcy to 21 months and increases the cost
Credit report duration	3 years after completion or 6 years after filing	6 years after discharge (first bankruptcy)
Monthly payments	Fixed for the full term	Change if income rises

The single biggest difference is asset retention. In a consumer proposal, you keep your home, your car and your savings.

In bankruptcy, non-exempt assets are surrendered to the trustee. What counts as exempt in Ontario is set by the provincial Execution Act, and the limits are notably low relative to property values in the province.

Under Ontario’s exemption rules, your home equity is protected only if it is below $10,783. If it exceeds that amount, the entire equity is exposed to seizure. There is no partial exemption. You can also keep one vehicle worth up to $7,117, household furnishings up to $14,180, and tools of your trade up to $14,405. RRSPs are protected except for contributions made in the 12 months before filing.

Source: Ontario Execution Act, R.S.O. 1990, c. E.24

In a market where the average Ontario home carries hundreds of thousands in equity, a $10,783 threshold offers almost no protection. A consumer proposal avoids that entirely. You keep everything, and your payments are fixed from start to finish, regardless of changes to your income.

As of 2025, 81% of Ontario insolvency filings were consumer proposals, not bankruptcies.

Source: Office of the Superintendent of Bankruptcy Canada – Insolvency Statistics, Q4 2025

Can creditors reject a consumer proposal?

A consumer proposal needs acceptance from a majority of your creditors by dollar value. Not by head count. If you owe $50,000 across five creditors and the one holding $30,000 votes yes, the proposal passes even if three others vote no.

Most consumer proposals are accepted without a meeting. If no creditor holding at least 25% of your total proven claims requests a meeting within 45 days of filing, the proposal is deemed accepted.

The vast majority of consumer proposals are accepted by creditors because the alternative for them is usually bankruptcy, where they recover even less.

If creditors reject your proposal, the trustee can revise the terms and resubmit. Rejection does not force you into bankruptcy.

What debts can a consumer proposal include?

A consumer proposal covers most types of unsecured debt. That includes credit cards, personal loans, lines of credit, payday loans, medical bills, and tax debt owed to the Canada Revenue Agency. CRA is treated as an unsecured creditor and is bound by the proposal once it is accepted.

Some debts survive a consumer proposal regardless. Under Section 178(1) of the Bankruptcy and Insolvency Act, these include child and spousal support obligations, court fines and penalties, debts arising from fraud, and government student loans if you have been out of school for fewer than seven years.

Source: Government of Canada – Bankruptcy and Insolvency Act, Section 178

Secured debts, such as a mortgage or car loan, are not included in a consumer proposal. If you are current on those payments, you keep the asset and continue paying as normal.

What happens if you miss a payment on your consumer proposal?

Missing payments on a consumer proposal has real consequences. Under the Bankruptcy and Insolvency Act, if you fall three months behind on payments, your proposal is automatically annulled.

That is not a discretionary call. It happens by operation of law under Section 66.31.

Annulment erases the proposal entirely. Your original debt comes back in full, creditor protection ends, and collection activity resumes. You cannot file a new consumer proposal on the same debts after an annulment.

If your finances change before you hit three missed payments, talk to your trustee. You have the option to amend your proposal under Section 66.37 of the BIA.

That means lower monthly payments spread over a longer term. But the key is acting early.

How do you find a Licensed Insolvency Trustee in Ontario?

Only a Licensed Insolvency Trustee can file a consumer proposal. No other debt professional, regardless of what they advertise, has the legal authority to do it. The Office of the Superintendent of Bankruptcy licenses and regulates every trustee in Canada.

You can search for a licensed trustee in your area using the OSB’s online directory at the Government of Canada website. Initial consultations are free, and trustees are required by law to review all your options with you, not just a consumer proposal.

Source: Office of the Superintendent of Bankruptcy Canada – Find a Licensed Insolvency Trustee

Be wary of companies advertising “government debt relief programs” or “debt forgiveness” on social media. If they are not a Licensed Insolvency Trustee, they cannot file a consumer proposal. Check the OSB directory before you sign anything.

Ontario insolvency filings in 2025

Consumer insolvencies are rising across Ontario. In 2025, 52,838 Ontarians filed for insolvency, a 2.3% increase over 2024. Ontario accounts for more than a third of all consumer insolvency filings in Canada.

	Ontario (2025)	Canada (2025)
Total consumer insolvencies	52,838	140,457
Consumer proposals	42,694	110,168
Bankruptcies	10,144	30,289
Proposals as share of filings	80.8%	78.4%
Year-over-year change	+2.3%	+2.3%

Source: Office of the Superintendent of Bankruptcy Canada – Insolvency Statistics, Q4 2025

The 2025 national total is the highest in 16 years. The median debtor in 2024 was 46 years old with $53,997 in total liabilities and was more likely to cite loss of income or medical reasons than overspending.

Source: Office of the Superintendent of Bankruptcy Canada – Canadian Consumer Debtor Profile 2024

Frequently asked questions

How much debt do you need to file a consumer proposal in Ontario?

You must owe at least $1,000 in unsecured debt to file a consumer proposal. The upper limit is $250,000, excluding the mortgage on your primary residence. If you owe more than $250,000 in unsecured debt, a Division I proposal has no debt ceiling.

Will I lose my house if I file a consumer proposal?

No. A consumer proposal lets you keep all of your assets, including your home and vehicle. As long as you continue making your mortgage payments, your home is not affected.

This is one of the main reasons people choose a consumer proposal over bankruptcy.

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

A consumer proposal is removed from your credit report three years after you complete it or six years after you file it, whichever comes first. If you complete a five-year proposal on schedule, the record drops off one year after your final payment.

Can you file a consumer proposal on CRA tax debt?

Yes. The Canada Revenue Agency is treated as an unsecured creditor under the Bankruptcy and Insolvency Act. CRA tax debt, including income tax, GST/HST, and other amounts owing, is included in a consumer proposal and bound by its terms once accepted.

Is a consumer proposal better than bankruptcy?

It depends on your situation. A consumer proposal lets you keep your assets, avoids surplus income rules, and has a shorter credit impact than bankruptcy.

For anyone with equity in a home, a steady income or assets they want to protect, a consumer proposal is usually the better option. A Licensed Insolvency Trustee can walk you through both and tell you which one makes more sense.

Can I keep my car if I file a consumer proposal?

A consumer proposal does not affect your secured debts. If you are making your car loan payments, you keep the vehicle.

Even if you own your car outright, it is not surrendered. You keep all your assets in a consumer proposal.

How much do you actually pay back in a consumer proposal?

You repay only a portion of your total unsecured debt, not the full amount. The exact figure depends on your income, your assets, and what your creditors would receive in a bankruptcy. A trustee works out a monthly payment you can afford that also gives creditors more than they would get if you went bankrupt.

Can you get a mortgage after a consumer proposal in Ontario?

Getting a mortgage after a consumer proposal is possible, though not immediate. Most lenders want to see two to three years of clean credit history after your proposal is completed.

A down payment of 10% to 20% improves your chances. You can begin rebuilding your credit during the proposal with a secured credit card.

Talk to a Licensed Insolvency Trustee

If your debts have become unmanageable and you want to know whether a consumer proposal is a sensible route, talk to a Licensed Insolvency Trustee. The initial consultation is free, confidential, and comes with no obligation.