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Struggling with debt? You’re not alone. Nearly 45% of Canadians say they regret the amount of debt they’ve taken on, and one-third of them admit to having problems repaying their debts.
Filing a consumer proposal is often one of the best ways to recover from burdensome debt. A consumer proposal is a legal agreement that enables you to get out of debt for less than the full amount you owe. Consumer proposals filed by Remolino & Associates have a success rate of 96% and reduce your unsecured debts by up to 75%.
Read on to get answers to all your consumer proposal questions, including what a consumer proposal is, the pros and cons of filing a consumer proposal, how a proposal would affect your credit score, and more.
What Is A Consumer Proposal In Canada?
A consumer proposal is a legal agreement negotiated between you and your creditors. The consumer proposal is administered by federally regulated professionals called Licensed Insolvency Trustees (LITs) on your behalf.
A Licensed Insolvency Trustee works with you to create a proposal – a detailed offer to repay your creditors over the course of up to five years. Consumer proposals offer immediate relief from collection efforts while reducing your debt and outlining a payment arrangement for your remaining balance.
The exact amount of your total debt that will be forgiven depends on your ability to pay the balance. It’s not unusual for consumer proposals to reduce your total debt by 75%, but the outcome varies from case to case.
Popularity Of Consumer Proposals in Ontario
According to the Office of the Superintendent of Bankruptcy (OSB), consumer insolvency filings reached a 17-year high in the first quarter of 2026, with over 37,000 Canadians seeking financial relief. In Ontario, there were 13,913 consumer insolvency filings during this period, representing a 14.7% increase from the previous year. Nationally, nearly 80% of individuals filing for insolvency chose a consumer proposal over personal bankruptcy. At Remolino & Associates, 96% of the consumer proposals filed by our office are successful, helping Torontonians effectively manage and reduce their debt.
Pros And Cons of Consumer Proposal
Pros
Consumer proposals offer multiple benefits, including:
- Stops all collection efforts. Instantly halting all collection activities, meaning wage garnishments are lifted, pending lawsuits are frozen, and harassing phone calls from collection agencies stop immediately.
- Reduces your unsecured debt by up to 75%
- Helps you avoid bankruptcy
- Consolidates all your debts into a single fixed monthly payment
- Enables you to legally settle all unsecured debts, including those held by the Canada Revenue Agency (CRA)
- Helps you recover faster from overwhelming debt
- Is less damaging to your credit rating than other debt-relief options
- Protects your assets: A consumer proposal allows you to retain ownership of your assets, such as your home, vehicle, and investments, rather than surrendering them to creditors as you might in a bankruptcy.
- Halts interest and penalties: The moment your proposal is filed, all interest charges and late penalties are frozen. Your payments go directly toward the negotiated principal balance.
- Prioritizes affordability: The payment plan is based on what you can realistically afford. Your Licensed Insolvency Trustee works with you to establish a manageable monthly payment based on your current household income and budget.
Cons
However, filing a consumer proposal also has some disadvantages, which may make the process unsuitable for certain debtors. Some of the disadvantages include:
- Doesn’t cover your secure debt – Your secured loans won’t be included in the payment plan.
- Affects your credit rating – Filing a consumer proposal affects your credit rating.
- Higher borrowing rates – You become a high-risk borrower after filing a consumer proposal.
- May not include your student loans – The consumer proposal may not include your student loans if you haven’t been out of school for more than seven years.
- Shows up in your credit report for up to 6 years – The consumer proposal will show up in your public record for up to 6 years from the filing date.
Consumer Proposal Process in Toronto
- Contact a Licensed Insolvency Trustee for a free assessment. The LIT will help you identify the best debt-relief option for your particular situation.
- The LIT will go over your debts and assets and come up with a proposal offer for your creditors.
- Sign some documents, including the proposal offer.
- Your LIT files the paperwork with the court, starting the stay of proceedings and putting an end to all collection efforts.
- Your creditors decide whether to accept or reject your proposal within 45 days.
- If accepted, your proposal obtains court approval within 15 days. If it’s not accepted, your LIT will work with you to improve the proposal and file it again.
- Once accepted, you start making your agreed-upon payments.
- You start rebuilding your credit and attend two credit counselling sessions.
- Once you make all your payments and meet your conditions, you receive a Certificate of Completion and will be legally released from the debts you included in the proposal.
How To Qualify For A Consumer Proposal?
To qualify for a consumer proposal in Canada, you must be a resident or own property in the country and be unable to meet your current debt obligations as they become due.
For your proposal to be legally viable, your total debt must be $250,000 or less, excluding the mortgage on your primary residence.
Consumer proposals are designed specifically to resolve unsecured debts. Unsecured debts are loans or credit facilities that are not secured by collateral, such as a vehicle or a house. If you fall behind on payments, the lender does not have the automatic right to repossess a specific asset.
Eligible unsecured debts that can be included in your proposal typically consist of:
- Credit card debt
- Lines of credit
- Personal loans and payday loans
- Income tax debt owed to the Canada Revenue Agency (CRA)
- Student loans (provided you have been out of school for at least seven years)
Filing A Consumer Proposal in Toronto
Filing a consumer proposal is a regulated process in Ontario that includes several mandatory steps.
Book a free consultation and one of our trustees will go over your debts and assets. If you can’t pay off your debt through other means, such as debt consolidation, a consumer proposal may be an ideal solution if you neet the legal requirements:
- You are a Canadian citizen or own property in Canada
- Are in a state of insolvency
- Your total unsecured debt is less than $250,000
- Your income allows you to make long-term monthly payments
- You don’t have other insolvencies in progress
Your LIT drafts the proposal and payment terms and you sign the necessary documents. The trustee files your consumer proposal with the Official Receiver and notifies your unsecured creditors. Once the papers are filed, you are safe from all collection efforts, including wage garnishments and debt collector calls.
Your trustee sends copies of your proposal to your creditors and they have to respond within 45 days. If they don’t respond within that time, the Official receiver accepts the proposal. If the creditors respond on time, they may request a creditor meeting. Your creditors can vote to accept or reject your proposal during this meeting.
Once the creditors accept your consumer proposal, you start making the monthly payments you agreed upon. When you complete your final payment, you receive a Certificate of Full Performance which is proof that you completed the proposal and your debts are forgiven.
How Much Does A Consumer Proposal Cost?
The cost of a consumer proposal is based on your specific circumstances. You have to pay
- A filing fee of $100 to the OSB
- Two mandatory credit counselling fees of $85 each
- A $1,500 proposal fee to your trustee plus 20% of the creditor distributions
- 5% of the creditor distributions to the OSB
At Remolino & Associates, we don’t perceive additional taxes, such as up-front or set-up fees. When you let us handle your consumer proposal, you don’t have to make any payments until we officially file the consumer proposal.
Why Are Consumer Proposals Rejected?
Even though it rarely happens, your creditors may reject your consumer proposal if they believe that the amount you offer is too low. However, most of the time they will make a counter-proposal for you and your trustee to consider. You can either accept the proposal or come up with a counter-proposal of your own.
Our financial experts leverage their experience to create consumer proposals creditors cannot refuse. That’s why 96% of the consumer proposals we file are accepted.
What Debts Can Be Included In Consumer Proposal?
Consumer proposals can include multiple types of unsecured debts, including:
- Personal loans
- Payday loans
- Credit cards
- Lines of credit
- Unpaid utilities
- Store cards
- Income taxes
- Student loans (if you’ve been out of school for more than seven years)
- Mortgage or car loan
- Memberships
- Highway or bridge tolls
How Does A Consumer Proposal Affect Credit Score?
Filing a consumer proposal will lower your credit score in the short term, but it provides a clear path to long-term financial stability. When you file, the debts included in your proposal will be downgraded to an R7 credit rating. An R7 indicates that you are making regular payments through a specialized debt settlement arrangement.
This R7 rating will remain on your credit report for three years after you make your final payment, or up to six years from the date you initially filed the proposal, whichever comes first.
Typically, individuals take between three and five years to pay off their consumer proposal. However, you can choose to pay off the agreed-upon balance early without incurring any prepayment penalties, allowing you to begin the credit rebuilding process sooner.
Where To Get A Consumer Proposal in Toronto?
The Licensed Insolvency Trustee at Remolino & Associates can help you file a consumer proposal and get out of debt. Our experts will examine your financial situation and recommend the best possible solution to your debt. Together, we’ll help you move toward a debt-free future.
Choosing the Right Licensed Insolvency Trustee in Toronto
When facing financial hardship, selecting a trustworthy professional is vital to your financial protection. In Canada, only a Licensed Insolvency Trustee (LIT) is legally authorized to file and administer a Consumer Proposal. LITs are federally regulated professionals licensed by the Office of the Superintendent of Bankruptcy (OSB) to ensure the debt relief process is objective, transparent, and legally binding.
It is critical to remember that payments for a Consumer Proposal must only be made directly to a Licensed Insolvency Trustee. You should never make proposal payments to third-party debt consultants or unlicensed intermediaries. Working directly with an LIT guarantees that your rights as a consumer are upheld, your funds are safely distributed to your creditors, and you receive accurate financial guidance tailored to your specific situation in Toronto.
Consumer Proposal Alternatives
Consumer proposals are not the only debt solutions we recommend. Other solutions we can advise you on include
- Debt management plan
- Debt consolidation loan
- Personal bankruptcy
Book a free consultation with one of our experts and see which solution is right for you.
Debt Repayment & Consumer Proposal Calculator
Our debt calculator provides a comparison of what your monthly debt repayment might look like under different debt relief options including a debt consolidation loan, debt management plan and consumer proposal. Actual results may vary as each situation is unique. Your actual payments will be based on your income, assets and debts but this calculator provides a comparison of the potential savings of each option.
Simply enter your total unsecured debt, including credit card debt, bank loans, lines of credit, payday loans and tax debts. Do not include mortgage or secured car loans.
Enter Your Total Unsecured Debt
| Options To Eliminate Your Debt |
Monthly Payment (approximate) Over 5 Years |
Total Cost Over 5 Years |
Total Savings Over 5 Years |
|---|---|---|---|
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Consumer Proposal Settlement For Less Than Principal debt amount |
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Credit Counselling No Negotiate principal reduction |
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Debt Consolidation With on going applied interest cost |
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Repay Debt on Your Own Monthly payment with on going interest cost |
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Consumer Proposal FAQs
Yes, a consumer proposal will stop collection calls, wage garnishments, and all other actions carried out by collection agencies. Consumer proposals are legal proceedings under the Bankruptcy and Insolvency Act.
You will gain protection from debt collectors immediately after your LIT files your signed proposal documents with the OSB.
Yes, you can. While you won’t be able to change the total sum of your payments because that’s negotiated between you and your creditors before you start your payments, you can pay off your proposal early to begin your financial recovery process.
Yes, you have some duties. During a consumer proposal, you have to make all the required payments and attend two credit counselling sessions.
Unlike filing for bankruptcy, you don’t have to report your income and expenses when you file a consumer proposal, and you won’t lose any assets.
You are allowed to defer up to two payments if you can’t afford them, but your proposal will be ‘deemed to be annulled’ if you fail to make three payments. If this happens, your debts are immediately reinstated and you lose your creditor protection.
Yes, it can. Your unsecured tax debts can be included in your proposal and CRA is limited by the terms of the accepted proposal.
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