Consumer Proposal: How to file in Ontario

What is a consumer proposal?

A consumer proposal is a legally binding agreement under Canada’s Insolvency and Bankruptcy Act that lets an individual repay a portion of unsecured debt through an affordable plan overseen by a Licensed Insolvency Trustee (LIT) and filed with the Office of the Superintendent of Bankruptcy (OSB). Once filed, most collections, lawsuits, and wage garnishments are stayed (paused) by law. (OSB: consumer proposals; OSB: creditors after you file)

In practice, a proposal consolidates multiple unsecured debts (e.g., credit cards, lines of credit, payday loans, some tax debts) into one fixed monthly payment, usually over up to five years, often with zero interest. (OSB)

Who qualifies in Ontario?

• You are insolvent (can’t pay debts as they come due or your debts exceed your assets).
• Your total unsecured debts are no more than $250,000 (excluding a mortgage on your principal residence). Above that, consider a Division I proposal. (OSB)
• You live in Canada or carry on business here, and you have income to support regular payments.

Commonly included: credit cards, personal loans, lines of credit, payday loans, overdrafts, and many CRA tax debts (see the CRA section below). Typical exclusions: secured debts (e.g., mortgages, car loans), court fines, support arrears, and some government student loans under the 7‑year rule (see FAQ). Your LIT will confirm what applies to you. (OSB; BIA s.178)

How a consumer proposal works (step-by-step)

1. Free assessment with an LIT. Review your budget, debts, goals, and alternatives in confidence. Only LITs can file proposals. (OSB)
2. Crafting your offer. Your trustee designs a fair offer creditors are likely to accept, based on income, assets, and what creditors could expect in bankruptcy.
3. Filing & stay of proceedings. The LIT files your proposal with the OSB, triggering a legal stay that stops most collections and garnishments immediately. (OSB, “Creditors contacting you after you file”)
4. Creditor voting (up to 45 days). Unsecured creditors vote by dollar value; approval by a majority in value binds all. If 25% in value request it, a meeting is held. (OSB/BIA)
5. Court approval. If no review is requested, the court’s deemed approval occurs 15 days after creditor acceptance. (BIA s.66.22(2))
6. Payments & counselling. You make fixed payments (up to 60 months) to the LIT and complete two financial‑counselling sessions. (OSB)
7. Completion & legal release. After you meet all terms, you receive a Certificate of Full Performance and are released from the included debts. (OSB)

If creditors counter, your LIT can negotiate amendments to reach approval. If approval isn’t possible, other options—including bankruptcy—can be considered.

Benefits and drawbacks

Consumer proposal vs bankruptcy (Ontario)

Many Ontarians prefer a proposal when they wish to avoid bankruptcy, keep assets, and make a predictable, reduced payment under federal protection.

Credit score and rebuilding

In Canada, a consumer proposal is usually coded as R7. On retention: Equifax and TransUnion remove a proposal 3 years after completion or 6 years from filing, whichever comes first. The Financial Consumer Agency of Canada confirms these timelines. Equifax · TransUnion · FCAC

Practical steps to rebuild

• Open a modest secured credit card and use it lightly (keep utilization under ~30%).
• Pay all new obligations on time; set up automatic payments where possible.
• Review both bureaus every few months and dispute any inaccuracies.

Deep dive: How to rebuild credit after a consumer proposal.

Alternatives to compare

• Credit counselling program (DMP): An informal plan repaying 100% of principal; interest relief depends on creditor participation (no legal stay).
• Debt consolidation loan: May reduce interest but requires qualification and full repayment.
• Informal settlement: One‑off negotiations with individual creditors (no legal protection).
• Bankruptcy: Consider when income is unstable or a viable offer isn’t affordable; provides a discharge of eligible debts subject to conditions.

An Ontario LIT will review each route and recommend the option that best matches your goals and budget. (OSB)

Costs, payments, and timelines

There are typically no upfront fees to file. LIT professional costs are regulated federally and are paid from the proposal funds you send—so your quoted monthly payment is the amount you actually budget. Most proposals run 36–60 months, and you can pay off early without penalty. (OSB)

Example: You owe $40,000 on credit cards. Your trustee structures a $16,000 offer (40%) over 60 months: $266/month, interest‑free. If creditors accept, you save $24,000 plus avoided interest and collection pressure. (Illustrative only—your results will vary.)

Including CRA tax debt

The CRA has strong collection powers—wage garnishment, bank freezes, liens—but the proposal’s legal stay can halt most CRA collection actions once filed, provided you remain compliant going forward (e.g., file on time). See CRA’s powers on garnishment and third‑party demands and OSB guidance on stays: CRA garnishment overview; OSB: creditors after you file.

To include tax balances, your LIT will request recent Notices of Assessment and ensure returns are up to date. CRA, like other unsecured creditors, votes on your offer; proposals that provide a better recovery than bankruptcy are often accepted. (OSB/industry)

How to get started in Ontario

A Doyle Salewski Licensed Insolvency Trustee will review your entire situation, compare every option, and outline a proposal your creditors are likely to accept.

• Free, confidential consultation (virtual or in‑person).
• Review proposal vs bankruptcy, DMP, consolidation.
• Clear monthly payment based on your budget.

Ready to take the next step? Book a Free Consultation

Prefer local support? See our Ontario offices: Ottawa · Kingston · Cornwall · Pembroke · Renfrew

Compare options: Consumer proposal vs bankruptcy (Ontario).