Consumer Proposal Pros and Cons: Honest 2026 Analysis

A consumer proposal reduces your unsecured debt by 60-80% while you keep all your assets. You pay 20-50 cents per dollar owed over up to 60 months with fixed payments that never increase. The average Canadian proposal settles $40,000 debt for $14,000 total—saving $26,000 plus interest. Creditor harassment, lawsuits, and wage garnishments stop immediately. The catch: an R7 credit rating stays for 3 years after completion or 6 years from filing (whichever comes first), it’s a public record on the OSB database, and you must include all unsecured debts—no picking favorites.

This decision-stage analysis gives you specific numbers on what you gain and lose. You’re weighing options right now. You need the unfiltered truth.

The Major Advantages of Filing a Consumer Proposal in Canada

1. Slash debt by 60-80% through negotiated settlement

You repay 20-50% of what you owe. The rest disappears legally. A $40,000 debt becomes $14,000 paid over 60 months at $233 monthly. A $68,400 debt becomes $31,500 at $525 monthly. Licensed Insolvency Trustees structure offers that creditors accept. You’re paying more than they’d get in bankruptcy, so creditors vote yes.

2. Keep 100% of your assets with zero seizure

Home equity stays yours. RRSPs stay yours. TFSAs stay yours. Vehicles stay yours. Tax refunds stay yours. Unlike bankruptcy, where your TFSA gets seized entirely, consumer proposals protect everything. RRSP contributions from the past 12 months also get taken in bankruptcy. You own a paid-off car worth $18,000? It’s safe. You have $35,000 in RRSPs? Untouchable.

3. Stop all collection activity immediately upon filing

Your Licensed Insolvency Trustee files Form 79 with the Office of the Superintendent of Bankruptcy. Creditors must stop calling that same day. Wage garnishments end. Lawsuits freeze. CRA tax debt collection halts. This legal protection is called a stay of proceedings under Section 69 of the Bankruptcy and Insolvency Act. Break it and creditors face penalties.

4. Lock in fixed payments with no surplus income reporting

Your payment never increases. Get a raise? Your payment stays the same. Earn a bonus? Your payment stays the same. Bankruptcy forces monthly income reporting. Earn $200 more and owe $100 more in surplus. Consumer proposals calculate your payment once based on what creditors will accept. Then it’s frozen. No paperwork. No adjustments.

5. Freeze all interest charges from filing date forward

That 19.99% APR credit card? Now 0%. That 29.99% department store card? Now 0%. Every dollar you pay reduces principal. On $40,000 at 19.99% APR, you’re paying $21.88 daily in interest. That’s $667 monthly before touching principal. Filing stops the bleeding.

6. Avoid the surplus income penalty that makes bankruptcy expensive

Bankruptcy uses surplus income tables from the Office of the Superintendent of Bankruptcy. Earn above the threshold and you pay 50% of the excess. Single person earning $87,000? You’re $2,400 monthly over the threshold. That means $1,200 monthly in surplus payments. Families earning $110,000 hit penalties. Consumer proposals ignore these calculations entirely.

7. Maintain higher acceptance rate with proper structuring

The Office of the Superintendent of Bankruptcy reports 60-66% overall acceptance nationally. Reputable LITs with experience hit 95-99% because they know what creditors approve. They won’t file a proposal destined to fail. They calculate minimum acceptable offers. They present realistic payment schedules. They structure terms creditors vote to accept.

Real scenario: Andre, Winnipeg, MB

Andre owed $47,200 across three debt types. $28,400 sat on credit cards at 22.99% average APR. $11,500 was a line of credit at 9.45%. $7,300 was CRA tax debt with daily compounding interest. Collections called his workplace twice daily. CRA sent a garnishment notice giving him 30 days before seizing 30% of his paychecks.

His Licensed Insolvency Trustee structured a proposal at $300 monthly for 54 months. Total: $16,200. That’s 66% debt reduction. Creditors voted to accept because they’d get zero if Andre filed bankruptcy. He had no assets and income under surplus threshold. Andre kept his $8,200 used Honda Civic and $4,100 in his RRSP. Collection calls stopped the day he filed.

Every month Andre doesn’t file costs him $904 in interest across all debts. That’s $10,848 annually. His proposal saves $30,600 after trustee fees compared to paying minimums for 11 years.

Stop paying $21 daily in interest on debt you could settle for 30-40 cents per dollar. Book a free consultation with a Licensed Insolvency Trustee to get your exact settlement amount and monthly payment.

Calculate Your Debt Relief Options → · Find a Licensed Insolvency Trustee →

The Serious Drawbacks You Need to Know Before Filing

Consumer proposals solve debt problems but create new challenges. Here’s what you’re signing up for.

1. R7 credit rating tanks your score for 3-6 years

Consumer proposals earn an R7 rating on your Equifax and TransUnion reports. This means “making regular payments through special arrangement to settle debts.” Credit scores drop 100-200 points immediately. The R7 stays for 3 years after your final payment OR 6 years from filing date—whichever comes first. Complete your proposal in 2 years and the R7 lasts 5 years total. Take the full 5 years and it’s removed at 6 years.

During this period, credit card approvals come with 24-29% interest rates. Mortgage qualification is difficult. Most lenders reject proposals in progress. Auto loans cost 8-14% instead of 4-6%. Some landlords reject rental applications when they see R7 ratings during credit checks.

2. Your proposal becomes public record on the OSB database

The Office of the Superintendent of Bankruptcy maintains a searchable database. It includes all consumer proposals and bankruptcies. Anyone who pays the search fee can find your filing. It’s not Google-searchable and most people never look. But it’s not private. Employers, landlords, or nosy relatives with $8 and your name can access it.

Your credit report also shows the R7 rating with a note. It says “Consumer proposal filed.” Every creditor you apply with sees this. You must disclose the proposal on loan applications. There’s a question: “Have you ever filed bankruptcy or consumer proposal?” Lying is fraud.

3. All unsecured debts must be included—no exceptions

You cannot pick which creditors to include. File a proposal and every credit card, line of credit, payday loan, personal loan, medical debt, and CRA tax debt goes in. You owe $18,000 to Capital One and $600 to your local credit union? Both get included. Want to keep one credit card open? Not allowed.

This creates relationship problems. If your brother lent you $2,000, that’s an unsecured debt. It goes in the proposal. He gets pennies on the dollar like every other creditor. Owe money to friends or family? They’re creditors now.

4. Maximum 60-month term means mandatory monthly commitment

Consumer proposals max out at 60 months under the Bankruptcy and Insolvency Act—see the consumer proposal timeline for the full schedule. Can’t negotiate 7 years to lower payments. Your Licensed Insolvency Trustee calculates the minimum creditors will accept. Then spreads it across up to 60 months. If creditors won’t accept less than $400 monthly, you need $400 monthly in your budget. For up to 5 years.

Miss 3 payments and your proposal annuls. Creditors regain full collection rights. The $6,400 you paid over 16 months? Gone to trustee fees and partial creditor payments. You’re back at square one with original debt minus whatever creditors received. Facing lawsuits and garnishments again.

5. Credit access restricted during proposal term

Getting new credit during an active proposal is nearly impossible. Banks see R7 rating and reject applications. Subprime lenders offer credit rebuilding cards. $300 limits. 29.99% APR. Plus $120 annual fees. Auto loans come from specialty lenders at 12-18% interest.

You need a vehicle for work and yours dies? Expect 14% interest. Plus $2,000 down on a $15,000 used car. You need to rent a new apartment? Some landlords require co-signers when they see R7 ratings. You want to start a business requiring a credit line? Not happening.

6. Student loans under 7 years old stay excluded

Student loans less than 7 years from your last study date cannot be included. You owe $32,000 in credit cards and $28,000 in student loans from 2021? The student debt stays. You still owe full balance with interest. While making proposal payments on the credit cards.

Once student loans hit 7 years old, they become eligible for proposals. Graduated in May 2019 and filing in February 2026? You’re 6 years 9 months out. Wait 3 months and include them. File now and they’re excluded.

7. Cost structure includes $1,500 filing fee plus 20% commission

Your Licensed Insolvency Trustee charges $1,500 to file your proposal—see consumer proposal fees for the full breakdown. This goes to the Office of the Superintendent of Bankruptcy. They also take 20% of all future payments as commission. These fees are built into your monthly payment—nothing upfront. But they reduce what creditors receive.

Offer $300 monthly for 60 months? That’s $18,000 total. The $1,500 filing fee plus $3,600 commission equals $5,100 in fees. That’s 20% of $18,000. Creditors split $12,900. You’re paying $5,100 for debt relief administration. Compare this to paying the full $40,000 with interest. $5,100 is a bargain. But it’s still real money leaving your pocket.

Real scenario: Carmen, Surrey, BC

Carmen owed $19,800. $14,200 on credit cards. $3,400 in payday loans at 391% APR. $2,200 in medical bills from a dental emergency. She filed a consumer proposal at $175 monthly for 48 months. $8,400 total. Reducing debt by 58%.

Year one was brutal. Carmen applied for a rental apartment in a newer building. The landlord ran a credit check. Saw the R7 rating. Rejected her application. She needed her sister to co-sign a lease at a different property. Her car needed $2,800 in repairs. She couldn’t get a line of credit. She had to negotiate a payment plan with the mechanic. Over 8 months.

Carmen’s credit score dropped from 640 to 480 after filing. Two years later it’s back to 580. She makes on-time proposal payments. But she still can’t qualify for competitive credit. She’ll wait until the R7 is removed to apply for a mortgage.

The alternative was bankruptcy. That would have seized her $6,100 TFSA. Cost her more in surplus income payments. She chose the right path. But the credit impact is real.

Consumer Proposal vs Bankruptcy: Side-by-Side Comparison

High-income earners pay dramatically more in bankruptcy due to surplus income rules. Single person earning $87,000 annually? You’re $2,400 monthly over the threshold. That’s $1,200 monthly in surplus payments. For 21 months. $25,200 total. A consumer proposal might settle the same debt for $18,000. Over 60 months. With fixed $300 payments.

Bankruptcy is faster for low-income filers with no assets. Earn under the surplus threshold? You’re discharged in 9 months with minimal cost. But you lose your TFSA. Recent RRSP contributions. Tax refunds. Any non-exempt assets like a second vehicle or valuable tools.

The R9 bankruptcy rating is worse than R7. It signals “bad debt written off” versus “paying through arrangement.” R9 stays longer and hits credit scores harder. Drops of 200-300 points are common.

High-income earners with assets choose proposals to avoid surplus income penalties and protect TFSAs. Low-income filers with no assets choose bankruptcy for faster discharge. Your income and asset situation determines which path costs less.

Who Should File a Consumer Proposal (And Who Shouldn’t)

Best for:

Debt between $10,000-$250,000 unsecured

Below $10,000, filing costs eat too much of the benefit. About $1,500 plus 20% commission. Above $250,000 unsecured (excluding mortgage), you’re ineligible. Under the Bankruptcy and Insolvency Act. You need Division I proposal or bankruptcy instead.

Stable employment or reliable income

You need to demonstrate ability to make fixed monthly payments. For up to 60 months. Creditors reject proposals from filers with sporadic income. Or no clear repayment capacity. Full-time employment works. Pension income works. Disability benefits work. Stable self-employment income works. Seasonal income or irregular gig economy earnings make proposals risky.

Asset owners protecting equity or savings

You own a home with $65,000 equity? Consumer proposal protects it. You have $35,000 in RRSPs and $12,000 in TFSAs? Proposal protects both. Bankruptcy seizes your TFSA entirely. Takes RRSP contributions from the past 12 months. You own a paid-off vehicle worth $22,000? Bankruptcy exemptions vary by province. Ontario exempts $7,117. Meaning you lose $14,883. Proposals protect the full value.

Income earners above surplus threshold

Surplus income thresholds for 2026 start at $2,355 monthly net. For single individuals. $2,934 for couples. Plus $622 for each dependent. Earn above this and bankruptcy costs 50% of the excess. For 21 months. Earn $5,000 monthly net as a single person? That’s $2,645 over threshold. Meaning $1,322 monthly × 21 months = $27,762 in bankruptcy. A consumer proposal might settle for $20,000 over 60 months.

CRA tax debt or garnishment threats

Canada Revenue Agency can garnish wages without court approval. Seize bank accounts. Register liens on property. Consumer proposals include CRA tax debt. Stop all collection action immediately. Bankruptcy does the same. But if you have assets or income above surplus threshold, proposals cost less.

Real scenario: Dev Patel, Mississauga, ON

Dev owed $68,400 split across three debts. $42,100 on credit cards at 21.5% average APR. $18,200 line of credit at 11.99%. $8,100 CRA tax debt from an incorrect assessment three years ago. CRA sent a garnishment notice. Targeting 30% of his paycheck starting in 15 days.

Dev earns $87,000 annually. $5,230 monthly net. He’s $2,875 monthly over the surplus income threshold for a single person. Bankruptcy would cost $1,437 monthly in surplus payments. For 21 months. $30,177 total. He also owns $35,000 in RRSPs. $12,000 in TFSAs. A paid-off 2019 Honda Civic worth $14,500.

His Licensed Insolvency Trustee structured a consumer proposal. $525 monthly for 60 months. $31,500 total. Creditors accepted because it was more than bankruptcy would yield. Dev’s income meant high surplus payments. But his assets were mostly RRSP-protected. Dev kept all his assets. Total cost: $31,500 over 5 years versus $30,177 over 21 months in bankruptcy.

Dev chose the proposal for two reasons. The monthly payment fit his budget better. $525 versus $1,437. He protected his TFSA. $12,000 saved. And his vehicle. No liquidation risk. The extra $1,323 total cost bought him payment flexibility and asset protection.

Find out if you qualify for 60-80% debt reduction while protecting your assets. Free consultation, no obligation, exact numbers for your situation.

Speak With a Local LIT Today →

Not ideal for:

Debt under $5,000

Filing fees plus trustee commission can cost more than the debt itself. Owe $4,200? Filing costs $1,500 plus 20% of settlement. Let’s say $2,000 total settlement. That’s $1,700 in fees on $2,000 paid. You’re spending $3,700 to settle $4,200 debt. Negotiate directly with creditors instead. Or use credit counseling.

Unstable or seasonal income

Three missed payments annul your proposal. Work seasonal construction? Earning $6,000 monthly in summer and $0 in winter? You can’t sustain fixed $400 monthly payments. Proposals need consistent income. Gig economy workers with wildly variable monthly earnings face high annulment risk. Creditors reject proposals from filers without demonstrated payment capacity.

No assets and low income

You own nothing. Rent an apartment. Have no RRSP or TFSA. Earn $32,000 annually. Owe $18,000. Bankruptcy costs you nothing. No assets to lose. Income below surplus threshold. Discharged in 9 months. Why spread payments over 60 months in a proposal? When bankruptcy is faster and cheaper?

Student loans under 7 years old

Student debt less than 7 years from last study date cannot be included. You owe $45,000 in student loans from 2022? Plus $12,000 in credit cards? Proposals only cover the $12,000. You’re still paying full student debt. While making proposal payments. Wait until loans hit 7 years. Or consider bankruptcy. Same 7-year rule but faster discharge.

Need credit access immediately

Planning to buy a house in 2 years? R7 rating kills mortgage qualification. Need a vehicle loan next year? Expect 14% interest and large down payments. Consumer proposals wreck credit access for 3-6 years. If you need credit soon for essential purposes, consider other options. Restructuring existing debt through consolidation loans preserves better credit access. Credit counseling programs do too. Compare all debt relief options before deciding.

Previous proposal currently active or annulled

You cannot file a second consumer proposal while one is active. You also cannot file another proposal for the same debts. If your first proposal was annulled. Creditors won’t accept twice. Annul your proposal and you’re stuck. Bankruptcy or other debt relief options remain.

How Much Debt Can You Actually Eliminate?

Consumer proposals typically eliminate 60-80% of unsecured debt. You repay 20-50% depending on your circumstances. The Office of the Superintendent of Bankruptcy reports average settlements of 32 cents on the dollar nationally. But this varies widely.

Your Licensed Insolvency Trustee calculates what creditors will accept based on four factors:

• Your income and ability to pay
• Your assets and what they’d receive in bankruptcy
• Your family size and expenses
• Creditor types (banks negotiate differently than CRA or payday lenders)

Higher income means higher offers. More assets means higher offers. The goal: offer creditors more than bankruptcy would yield.

Real settlements from Licensed Insolvency Trustee case files:

The $9,000 debt settled at 47% because the debtor had low income. No assets. Creditors knew bankruptcy would yield nothing. The $140,700 debt settled at 74% because the debtor received an inheritance. Paid a lump sum. Creditors accepted less for immediate payment.

Acceptance rates vary by province according to OSB data. British Columbia and Ontario hit 60% acceptance rates. Atlantic provinces run around 50%. Alberta sits at 58%. These are averages across all proposals filed—good and bad. Reputable Licensed Insolvency Trustees with proper structuring report 95-99% acceptance. They don’t file weak proposals.

Creditors vote on your proposal. You need majority approval by dollar value. If creditors holding 51% of your debt vote yes, it binds all creditors. Single creditor holding 60% of your debt votes yes? Proposal passes even if all others vote no. Creditors rarely vote at all. Most abstain. Abstentions count as yes votes.

Compare proposal savings to the alternative. $40,000 in credit card debt at 19.99% APR with 3% minimum payments takes 11 years 4 months to pay off. Total paid: $68,115 including interest. A consumer proposal settling for $14,000 saves you $54,115 minus trustee fees.

Every month you delay deciding costs money. $40,000 at 19.99% APR accrues $666 in interest monthly. Before you touch principal. That’s $21.88 daily. Debt doesn’t pause while you weigh options.

The Credit Rating Impact: R7 Explained With Real Timelines

R7 rating means “making regular payments through special arrangement to settle debts.” It’s a step above R5 (120 days late). Below R9 (debt written off in bankruptcy). Credit scores drop 100-200 points immediately upon filing. Equifax and TransUnion both report R7 ratings.

The timeline formula: 3 years after completion OR 6 years from filing date. Whichever comes first.

Real timeline examples:

The 6-year cap prevents proposals from affecting credit longer than bankruptcy. Complete your proposal early and the R7 disappears sooner. Pay off $18,000 in 30 months instead of 60? The R7 lasts 4.5 years total instead of 6.

During the R7 period:

Credit card applications get rejected by major banks. You qualify for secured cards requiring $500-$1,000 deposits. Rebuilding cards with $300-$500 limits at 29.99% APR. Or nothing. Capital One and Home Trust offer credit rebuilding products. Expect $120 annual fees and low limits.

Mortgage qualification is nearly impossible during active proposals. Lenders see R7 and reject applications. After completion, you face B-lender mortgages. 5.99-8.99% interest instead of prime at 4.5-5.5%. Wait for R7 removal and A-lender rates return.

Auto loans come from subprime lenders. 8-14% interest. $2,000-$3,000 down payments on $15,000-$20,000 vehicles. Prime lenders offering 4-6% rates reject R7-rated applicants.

Rental applications sometimes include credit checks. Some landlords reject R7 ratings. Especially for competitive units in hot markets. You might need a co-signer. Smaller landlords skip credit checks entirely.

Employment screening rarely includes credit checks. Except for financial sector jobs. Government positions requiring security clearance. Senior management roles. Most employers never see your credit report.

Bankruptcy’s R9 rating is worse. It stays for 6 years after discharge for first bankruptcies. 14 years for second bankruptcies. Credit score drops are larger. 200-300 points common. R9 signals “bad debt written off.” R7 signals “paying through arrangement.” Lenders view R7 more favorably.

Rebuild credit during your proposal by:

• Making on-time proposal payments (reported to credit bureaus as “paying as agreed under arrangement”)
• Opening a secured credit card and paying it in full monthly
• Becoming an authorized user on someone else’s card (if they have excellent payment history)
• Paying all bills on time (phone, utilities, rent)
• Keeping credit inquiries minimal (each application dings your score 5-10 points)

Your credit score starts recovering 12-18 months into on-time proposal payments. By completion, scores often return to 580-650 range. Once the R7 is removed, scores jump another 80-120 points. Within 3-6 months. If you’ve built positive payment history.

What Happens If You Miss Payments or Can’t Complete

Life doesn’t pause for debt repayment. Job loss, medical emergencies, and unexpected expenses threaten proposal completion. Here’s what happens if you can’t pay.

Three missed payments annul your consumer proposal. “Missed” means cumulative. Skip 1 payment then catch up. Skip another later. Miss a third. That’s 3 missed. Your Licensed Insolvency Trustee reports the default. To the Office of the Superintendent of Bankruptcy. Annulment is automatic.

Consequences of annulment:

Creditors regain full collection rights immediately

The stay of proceedings lifts. Creditors can call. Sue. Garnish wages. Register liens again. They’re owed original debt minus whatever they received during your proposal. Paid $6,400 over 16 months before annulment? Creditors split that after trustee fees. About $4,800 went to them. You still owe $35,200 on the original $40,000.

No refund on trustee fees already paid

The $1,500 filing fee is gone. The 20% commission on payments made is gone. That $6,400 you paid included $1,500 filing fee. Plus about $960 in commission. $2,460 in fees. Creditors got $3,940. Annulment doesn’t return your money.

Cannot file second proposal for same debts

Once your proposal annuls, creditors won’t accept another. For the same debts. You’re stuck with bankruptcy. Debt consolidation loans if you qualify. Or negotiating payment plans directly with creditors. Proposals require creditor trust. Break it once and they vote no on future offers.

Amendment option saves proposals before annulment

You can request a proposal amendment once. If circumstances change. Job loss qualifies. Medical emergency qualifies. Divorce qualifies. Unexpected expenses qualify. Your Licensed Insolvency Trustee files an amendment request with creditors. Amendments typically:

• Lower monthly payment (extend term up to 72 months total)
• Pause payments temporarily (3-6 months) then resume
• Skip a few payments and make them up at the end

Amendments have no additional filing fees. Creditors vote on amendments the same as original proposals. Majority by dollar value needed. Most creditors approve reasonable amendments. They’d rather get paid slowly than not at all.

Critical: Contact your trustee immediately if you can’t pay

Don’t ghost your Licensed Insolvency Trustee. Miss one payment? Call that day. Explain the situation. They’ll work with you on amendments. Before you hit 3 missed payments and automatic annulment. Trustees want your proposal to succeed. They don’t get paid the remaining 80% commission if you annul.

Real scenario: Sarah Beaumont, Gatineau, QC

Sarah owed $31,700. $23,400 on credit cards. $8,300 personal loan. She filed a consumer proposal at $400 monthly for 60 months. $24,000 total. Reducing debt by 24%. Her income was $52,000 annually as an administrative coordinator.

Month 18, Sarah’s employer downsized her department. She lost her job. Severance covered 6 weeks. She missed her month 19 payment while job hunting. Month 20 she found contract work. Paying $3,200 monthly instead of her previous $3,800. She missed month 21 payment. She was at 2 missed payments. One more triggers annulment.

Sarah called her Licensed Insolvency Trustee immediately. They filed an amendment within 48 hours. Reduce payment from $400 to $275 monthly. Extend term from 60 months to 72 months. Total paid increases from $24,000 to $28,875. But Sarah keeps her proposal alive. Creditors voted to accept. Getting $28,875 over 72 months beats getting nothing if Sarah files bankruptcy.

Sarah caught up the 2 missed payments. $800. Over 4 months. By paying $475 monthly. $275 regular plus $200 catch-up. Her proposal survived. She avoided annulment. Kept her asset protection. She had $18,200 in RRSPs. She would’ve lost some in bankruptcy. Maintained the stay of proceedings.

If Sarah had ignored the problem, month 22 would’ve hit 3 missed payments. Automatic annulment. Creditors would’ve sued for $30,100 remaining. Original $31,700 minus $1,600 received in 16 payments after trustee fees. Her RRSPs would’ve been vulnerable in bankruptcy. She would’ve wasted $3,200 paid to her trustee.

Amendment saved her $18,200 in RRSP protection. Plus avoided 3 years of collection lawsuits. Potential wage garnishments. The extra $4,875 in proposal costs was worth it. $28,875 versus $24,000.

Making the Decision: Consumer Proposal Calculator Framework

Run your specific numbers before deciding. Generic advice fails when your situation has unique factors. Use this framework to calculate whether a consumer proposal makes financial sense.

Calculate YOUR numbers:

1. Total unsecured debt (exclude mortgage, secured car loans, student loans under 7 years): $______
2. Current monthly minimum payments (credit cards, lines of credit, loans): $______
3. Estimated proposal payment (debt × 30% ÷ 60 months): $______
4. Monthly payment savings (line 2 minus line 3): $______
5. Assets you want to protect: Home equity $, RRSP $, TFSA $, vehicles $, total $______
6. Income stability: Steady full-time job / pension / reliable contract work = YES or seasonal / gig / unstable = NO
7. Credit importance: Need credit for essential purchase in next 3-6 years = YES or can wait 6+ years = NO

Example calculation:

Dev from Mississauga ran these numbers:

1. Total unsecured debt: $68,400
2. Current monthly minimums: $1,840 (bleeding him dry)
3. Estimated proposal: $68,400 × 30% ÷ 60 = $342 estimated. Dev’s trustee calculated $525 based on his income and assets.
4. Monthly savings: $1,840 - $525 = $1,315
5. Assets: $35,000 RRSP + $12,000 TFSA + $14,500 vehicle = $61,500 to protect
6. Income stability: YES (full-time salary $87,000)
7. Credit importance: NO (plans to buy home in 2031, 5 years away)

Dev’s green lights: Massive monthly savings. Major assets to protect. Stable income. Credit timeline works. Clear proposal candidate.

Green light indicators (3+ = strong candidate):

• Monthly payment savings exceed $300
• Assets over $10,000 to protect
• Debt between $15,000-$250,000
• Stable income with clear ability to pay fixed amount
• Facing garnishment or lawsuit with legal deadlines
• Income above surplus threshold (would pay more in bankruptcy)
• Credit not needed for 3-6 years
• No active proposal or annulled proposal for same debts

Red light indicators (2+ = reconsider):

• Debt under $5,000 (fees eat the benefit)
• Unstable, seasonal, or gig income (annulment risk high)
• Zero assets to protect (bankruptcy is faster)
• Student loans under 7 years old form majority of debt
• Need credit immediately for essential purchase (mortgage, vehicle for work)
• Income far below surplus threshold with no assets (bankruptcy cheaper and faster)
• Already have active proposal or annulled proposal

The real comparison: Proposal vs doing nothing

$40,000 in credit card debt at 19.99% APR:

• Minimum payments (3% monthly): $1,200 first payment, decreasing slowly
• Payoff time: 11 years 4 months
• Total paid: $68,115 including interest
• Monthly interest cost: $666 (eats most of your payment)

Same debt in consumer proposal:

• Settlement: $14,000 (65% reduction)
• Monthly payment: $233 fixed
• Payoff time: 60 months (5 years)
• Total paid: $14,000 (includes trustee fees)
• Savings: $54,115 minus trustee fees = about $49,000 net savings

Every month you delay deciding costs you $666 in interest. On that $40,000 balance. That’s $21.88 daily. Waiting 6 months to decide costs $3,996 in interest alone.

The real comparison: Proposal vs bankruptcy

Dev’s situation:

Bankruptcy cost: $1,437 monthly surplus × 21 months = $30,177. Plus loss of $12,000 TFSA. $42,177 total economic cost.

Proposal cost: $525 monthly × 60 months = $31,500. Keeps all assets.

Difference: $10,677 savings with proposal. Plus payment flexibility. $525 versus $1,437 monthly.

But bankruptcy is faster. 21 months versus 60 months to completion. Some people value speed over cost. If Dev urgently needed credit access in 3 years, bankruptcy makes sense. Discharged in 21 months. Starts the R9 removal clock sooner. Than a 60-month proposal.

Your next step

Licensed Insolvency Trustees offer free consultations with no obligation. They review your debts, income, assets, and expenses. Then calculate exact proposal terms creditors would accept. They also explain bankruptcy costs for comparison. You walk away with specific numbers for your situation.

Do not file a consumer proposal because an article said it’s good. File because a Licensed Insolvency Trustee analyzed YOUR numbers. Confirmed it’s your best option. They’re the only professionals legally authorized to file proposals. Under the Bankruptcy and Insolvency Act.

Book a free consultation with a local Licensed Insolvency Trustee today. Get your exact proposal terms and savings calculated. Stop collection calls. Protect your assets. Lock in fixed payments that eliminate 60-80% of your debt.

Find a Licensed Insolvency Trustee in Your Area →

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Consumer proposals work for specific situations. Meaningful unsecured debt. Stable income. Assets worth protecting. Time to complete 3-5 year repayment terms. They fail for small debts under $5,000. Unstable income. Situations where bankruptcy is faster and cheaper.

You’re comparing two imperfect options. Proposals damage credit for 3-6 years but protect assets. Reduce debt by 60-80%. Bankruptcy wrecks credit for 6+ years. Seizes some assets. But finishes faster for low-income filers.

The right choice depends on your income level. Your asset situation. Your credit timeline. Run the numbers. Talk to a Licensed Insolvency Trustee. Make the informed decision that saves you the most money based on your specific circumstances.