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Consumer Proposals in Canada

A consumer proposal is a way to come up with a solution with your creditors to repay your debts. In most proposals you repay less than the full sum outstanding, plus your creditors agree to write off the rest of your debts. It’s a “win-win” for both of you.

Just what is it?

Unlike an informal debt settlement plan, a consumer proposal is a legally binding agreement that you and your consumer proposal administrator work out with your creditors.

Five Benefits associated with Consumer Proposals

They are a positive means to fix your financial problems. You are taking charge of your financial challenges, and proposing a settlement with your creditors. Declaring bankruptcy in Canada will also address your financial obligations, but that is a far more reactive approach, when you have no other options. They are an honorable resolution for your debt problems. You feel much better setting up a deal with your creditors.

They are cost-effective. Even though you may qualify for a debt consolidation loan, you will be repaying all of your financial obligations, in full, plus interest. For those who have a lot more debt than it is possible to handle, that’s very expensive. Consumer proposals offer one affordable payment per month, that you can afford, to handle all of your unsecured debts. Picture having some cash left over at the end of the month!

They give you protection from your creditors. You could make use of a debt consultant to negotiate with your creditors, however they can’t promise that your creditors won’t change their mind and take you to court. Consumer proposals give you protection from your creditors; they can’t take legal action against you or garnishee your income. Once it’s accepted, they cannot change their mind: it’s a legally binding settlement.

For many people, consumer proposals are better than filing bankruptcy. Should you declare bankruptcy it is necessary to submit a monthly budget, with evidence of your earnings, to your trustee every month. In a bankruptcy, the more you earn, the more you are required to pay (it’s known as surplus income). When you get a bonus, or a raise, or work overtime while bankrupt, you have to pay more. With consumer proposals your payment is fixed, and never raises, even when your earnings goes up. So, should you expect your income to increase, they are better than bankruptcy.

Another advantage of consumer proposals over bankruptcy: you retain your assets. In a bankruptcy you lose your income tax return, and certain assets (like RESPs and any contributions you made to your RRSP in the year prior to bankruptcy). Based on where you reside in Canada, you may also lose the equity in your house. With consumer proposals you retain all of your assets, together with your tax refund.

The financial counsellors at BSCC provide solid financial advice and can help you become debt free to move on with your life. Contact them today for a free consultation – you will be very glad you did!


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