A consumer proposal is a legal way to repay part of your debt and avoid bankruptcy. This guide explains how it works, the pros and cons, and lighter alternatives like debt consolidation worth considering first.
A consumer proposal is a formal, legally binding agreement to repay a portion of your debts over time — usually up to five years. It's filed through a Licensed Insolvency Trustee (LIT), the only professional authorized to administer one in Canada, who negotiates with your creditors on your behalf. It's designed for people whose debt has become unmanageable, as an alternative to bankruptcy.
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Important: Loanspot.ca does not file or administer consumer proposals — that must be done by a Licensed Insolvency Trustee. This page is for information, to help you understand your options before you decide.
A Licensed Insolvency Trustee reviews your finances and helps you offer your creditors a single, reduced amount — paid over the agreed term. If creditors holding a majority of the debt accept, the proposal becomes binding on all of them, collection calls stop, and you make one monthly payment to the trustee. You typically keep your assets, unlike in bankruptcy.
A consumer proposal is reported on your credit and stays for a set period after completion, so it has a lasting credit impact. It's a serious step for serious debt — which is why it's worth understanding the lighter options first.
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Pros: you repay only part of what you owe, interest stops, collection calls end, you usually keep your assets, and it's less severe than bankruptcy.
Cons: it's a formal insolvency filing with a lasting credit impact, it's not reversible once accepted, and it's meant for debt you genuinely can't repay — not a shortcut for manageable balances.
If your debt is high but still manageable on your income, a less drastic option may solve the problem without a formal insolvency filing:
If those aren't enough, speak with a Licensed Insolvency Trustee about a consumer proposal — most offer a free initial consultation. The right choice depends on how much you owe and what your income can support.
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The questions Canadians ask most about debt relief.
It's a legally binding agreement, filed through a Licensed Insolvency Trustee, to repay part of your debt over up to five years — an alternative to bankruptcy.
Only a Licensed Insolvency Trustee can administer one in Canada. Loanspot.ca does not file proposals; this page is for information.
Yes. A consumer proposal is recorded on your credit report and stays for a set period after completion, so it has a lasting impact.
For many people, yes — you usually keep your assets and repay a portion rather than going through bankruptcy. The right choice depends on your situation; a trustee can advise.
If your debt is still manageable on your income, debt consolidation can simplify payments and lower your rate without a formal insolvency filing.
Yes — once accepted, interest on the included debts stops and you repay the agreed reduced amount over the term.
Compare lighter options like consolidation first, then, if needed, book a free consultation with a Licensed Insolvency Trustee to discuss a proposal.
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