Facing financial strain can feel overwhelming, but you’re not alone. Thousands of Canadians each year look for structured, legally backed solutions to reduce their debt while avoiding bankruptcy. One of the most popular and sustainable options is a consumer proposal. Understanding the process—what happens before, during, and after you commit—can help you feel more confident as you take this important step toward financial recovery.
In the early stages of researching your options, you might come across a reputable consumer proposal service offering to negotiate with your creditors on your behalf. But what happens after you reach out? This guide breaks down the process into simple, clear steps so you can know exactly what to expect—and what not to fear.
Recognizing When It’s Time to Seek Help
Most people don’t consider formal debt relief until their monthly payments become unmanageable. If you’re only covering minimums, juggling multiple creditors, or facing collections, it might be time to explore alternatives that don’t just pause the problem—but solve it. Consumer proposals are legally binding agreements that allow you to repay a portion of your debt over time without additional interest, often reducing what you owe significantly.
Booking the Initial Consultation
Your journey starts with a free consultation, usually with a Licensed Insolvency Trustee (LIT). These federally regulated professionals are the only ones legally permitted to file consumer proposals in Canada. During this first meeting, you’ll provide a full picture of your financial situation: debts, assets, income, and monthly expenses.
Expect a judgment-free conversation. The trustee is there to offer support, not scold you. Their job is to assess whether a consumer proposal is the most appropriate solution for your circumstances—and to explain all available options, including bankruptcy and debt consolidation.
Evaluating Your Eligibility
Not everyone qualifies for a consumer proposal. To be eligible, your total unsecured debts must be less than $250,000 (excluding a mortgage on your principal residence). The trustee will confirm that you have a stable enough income to make the reduced monthly payments over a period of up to five years.
If you’re eligible and willing to proceed, the trustee will begin drafting a proposal that reflects what you can realistically afford while offering a fair settlement to your creditors.
Crafting the Proposal
This is a crucial step. The trustee prepares a detailed document outlining your financial situation, your proposed monthly payment, and how the money will be distributed to your creditors. The proposal also includes a comparison of how much creditors would receive if you filed for bankruptcy instead.
The goal here is to find a middle ground that satisfies your creditors more than bankruptcy would—while still relieving your financial burden.
Filing and Notifying Creditors
Once you approve the proposal, the trustee files it with the Office of the Superintendent of Bankruptcy (OSB). This action triggers an immediate “stay of proceedings,” which means creditors can no longer contact you for payments, garnish your wages, or take legal action.
Your creditors then have 45 days to vote on whether to accept the terms. If the majority (by dollar value of debt) agrees, the proposal becomes legally binding for all.
Navigating the Creditor Voting Process
Creditors may accept, reject, or suggest amendments to your proposal. If amendments are requested, your trustee will discuss them with you before deciding whether to resubmit. In most cases, proposals are accepted without major changes—especially when the offer is fair and better than what creditors would receive through bankruptcy.
You won’t need to face your creditors directly. Your trustee manages all communications and negotiations, so you can focus on preparing for your financial reset.
Making Monthly Payments
Once accepted, you’ll begin making your agreed-upon monthly payments to the trustee, who will then distribute the funds to your creditors. These payments are fixed, interest-free, and based on your budget—not your original debt load.
Staying on schedule is essential. Missed payments can void the proposal and re-open the door to collections. But with support and planning, most people find the payments manageable and even empowering.
Completing Mandatory Financial Counselling
As part of the process, you’re required to attend two financial counselling sessions. These sessions are designed to help you rebuild your financial knowledge, avoid future debt pitfalls, and create sustainable budgeting habits.
Rather than being bureaucratic hurdles, these sessions are highly practical and often eye-opening. They provide the tools needed to make smarter financial decisions moving forward.
Rebuilding After Completion
Once you’ve made your final payment, your debts covered under the proposal are legally discharged. You’re no longer liable for them, and you’ve avoided the long-term impact of bankruptcy.
Your credit report will reflect that a consumer proposal was filed, and this will remain visible for three years after completion. While that may sound daunting, many people begin rebuilding credit much sooner—often within months—by using secured credit cards or small personal loans responsibly.
You’ll emerge with a clean slate, financial education, and the confidence to rebuild.
Moving Forward With a Stronger Foundation
Choosing to move forward with a consumer proposal isn’t just about clearing debt—it’s about reclaiming control. The process may feel intimidating at first, but each step is designed to protect your interests while offering creditors a fair resolution. With the right guidance, patience, and commitment, many Canadians turn this challenging period into a powerful opportunity for growth.
By understanding the process, working with the right professionals, and keeping your long-term financial health in mind, you can take control of your future—one step at a time.
