EI and Consumer Proposals: What Happens to Your Employment Insurance Benefits?

Losing your job and carrying debt at the same time is one of the most frightening financial positions a person can be in. If you are collecting Employment Insurance and thinking about a consumer proposal, the single most important thing to know is this: filing a consumer proposal does not cancel, reduce, or interrupt your EI benefits. EI continues. The two systems operate under completely different laws. What a proposal does affect is how your current income — including EI — factors into the payment amount your Licensed Insolvency Trustee (LIT) negotiates with your creditors.

Your EI Benefits Are Not Affected

A consumer proposal is a legal process governed by the Bankruptcy and Insolvency Act (BIA). Employment Insurance is governed by the Employment Insurance Act and administered by Service Canada. These are entirely separate federal systems that do not communicate with each other in ways that affect your entitlement.

When you file a proposal, Service Canada is not notified. Your EI claim status, your benefit rate, and your remaining weeks of entitlement are unchanged. You continue to certify for benefits on the same schedule. Payments land in your account as normal.

Your employer is also not notified. EI is a relationship between you and Service Canada — not your employer. The proposal is a confidential legal arrangement between you, your LIT, and your unsecured creditors. It does not appear on any employment record.

One more thing: if a creditor or collection agency had been garnishing your wages or intercepting your EI payments before you filed, the BIA s. 69 stay of proceedings stops that garnishment immediately — usually within 24 to 48 hours of filing. The stay applies to all unsecured creditors, including government agencies like ESDC.

Worried about losing EI on top of everything else? You won’t. Talk to a Licensed Insolvency Trustee near you — the first consultation is free.

How EI Income Affects Your Proposal Payment

While EI does not affect your right to receive benefits, it does count as income when your LIT calculates what you can afford to pay in a proposal.

In 2026, EI replaces 55 percent of your average insurable weekly earnings, up to a maximum benefit of $695 per week ($2,840 per month before tax). If EI is your only income source, your monthly after-tax income may be in the range of $1,600 to $2,400 depending on your earnings history and province.

Your LIT uses your current income — and your monthly living expenses — to determine what a fair, affordable proposal payment looks like. With EI as your only income, payments are typically set between $200 and $500 per month. That compares favourably to the minimum monthly payments you were likely making across credit cards, personal loans, and other debts.

If your income changes during the proposal, you and your LIT can adjust. If you return to full-time work mid-proposal and your income increases substantially, your LIT can file an amendment to increase the monthly payment — which may shorten the proposal term. If your EI runs out and you remain unemployed, your LIT can help you request creditor forbearance or a brief payment deferral.

The flexibility of a negotiated proposal is one of its core advantages over bankruptcy — there is no automatic surplus income formula applied to whatever you earn.

EI in Bankruptcy vs. Consumer Proposal: The Key Difference

This distinction matters, so it deserves its own section.

In a consumer proposal, your EI income is used to calculate a payment that your creditors must vote to accept. There is no government-mandated formula. Your LIT negotiates a fixed monthly amount based on what you can realistically afford and what creditors are likely to approve — typically more than they would recover in a bankruptcy, but affordable to you.

In a bankruptcy, EI counts toward the surplus income threshold set by the Office of the Superintendent of Bankruptcy (OSBI Directive 11R2). The threshold varies by household size. A single person had a net monthly income threshold of approximately $2,372 in 2025. If your total monthly income — including EI — exceeds that threshold, you must pay 50 percent of the excess to your bankruptcy estate. This extends your bankruptcy from nine months to 21 months and increases your total cost.

For example: a single person receiving $2,600 per month net in EI benefits would be $228 over the threshold. They would owe $114 per month in surplus income payments, every month, until discharge.

In a consumer proposal, none of that formula applies. You and your LIT negotiate directly — and a $200 monthly proposal payment is often accepted by creditors when EI is your only income, because it’s still more than the zero they’d receive if you walked away.

If you have debt and are on EI, the surplus income rules in bankruptcy are a strong reason to consider a proposal instead. Read the full breakdown in our bankruptcy surplus income guide.

CERB Debt and EI Overpayments: Can You Include Them?

Yes — and this is one of the most common questions LITs receive from Canadians who received pandemic benefits.

CERB repayment debt owed to the Canada Revenue Agency (CRA) or Employment and Social Development Canada (ESDC) is unsecured government debt. It can be included in a consumer proposal alongside credit cards, personal loans, and lines of credit. Filing a proposal immediately stops any CRA collection action — including garnishment of your tax refund or EI payments — through the BIA s. 69 stay of proceedings.

EI overpayments owed to Service Canada are treated the same way. If Service Canada overpaid you and has been deducting the balance from your ongoing EI payments, a proposal filing and stay of proceedings stops those deductions. The overpayment balance becomes an unsecured claim in your proposal.

For a detailed breakdown of how CRA pursues CERB debt and how a proposal stops it, see our guide on CERB debt and CRA garnishment.

Scenario 1: Laid Off, on EI, and Drowning in Credit Card Debt

Priya Sharma, 41, Mississauga, Ontario. Priya was laid off from her logistics coordinator role in March 2026. She started collecting $2,200 per month in EI benefits. She had $34,000 in credit card debt and a $6,000 personal loan — minimum payments of $1,100 per month — which she could no longer service on EI alone.

Priya filed a consumer proposal in April. Her LIT calculated that she could afford $275 per month on her current EI income. Creditors accepted — $275 per month over 48 months totals $13,200, roughly 33 cents on the dollar. The stay of proceedings stopped all collection calls immediately.

Her EI was never affected. She continued receiving $2,200 per month from Service Canada without interruption. When she returned to a new job six months later at $62,000 per year, she and her LIT reviewed the proposal and left the payment unchanged — the creditors had already accepted the fixed amount.

Scenario 2: CERB Repayment Debt Included in a Proposal

David Tremblay, 38, Québec City, Québec. David received $14,000 in CERB payments in 2020. In 2023, ESDC determined he was ineligible for a portion of those benefits and issued a $6,200 repayment demand. David also carried $18,500 in credit card debt. Combined, he owed $24,700 in unsecured debt.

David filed a consumer proposal in early 2026 that combined both debts. His LIT structured a payment of $320 per month over 54 months — a total of $17,280, representing about 70 cents on the dollar for all creditors combined. ESDC voted to accept along with the bank creditors. The CERB repayment demand was legally resolved.

David completed two mandatory financial counselling sessions with his LIT as required under the BIA. These sessions covered budgeting, credit rebuilding, and how to avoid insolvency in the future.

What Else Continues During a Consumer Proposal?

EI is not the only benefit that continues unaffected during a consumer proposal. The following government programs continue without interruption:

• Ontario Works (OW) and Ontario Disability Support Program (ODSP) — not clawed back by a proposal
• Canada Pension Plan Disability (CPP-D) — continues unaffected
• Canada Child Benefit (CCB) — continues unaffected
• GST/HST Credit — continues unaffected
• Canada Carbon Rebate — continues unaffected
• Old Age Security (OAS) and Guaranteed Income Supplement (GIS) — continues unaffected

None of these benefits are considered assets under the BIA for proposal purposes. They are excluded from your creditors’ reach.

What is affected by a consumer proposal:

• Your credit rating — accounts included in the proposal are rated R7. The proposal notation stays on your credit file for three years after completion, or six years from filing, whichever comes first.
• New unsecured credit — most lenders will not extend new unsecured credit while the proposal is active.
• Two mandatory financial counselling sessions with your LIT — required under the BIA before your proposal is completed.

These are real trade-offs. But for Canadians who are already on EI and already missing payments, the credit impact is often less severe than the ongoing damage of unpaid accounts and collection actions.

The Right Time to File

If you are on EI right now and you have debt you cannot service, the timing of your proposal matters.

Filing while your income is lower (EI only) locks in a lower monthly payment. If creditors accept a $275 monthly payment when you are on EI, that same payment continues even when you return to work at a higher income — unless you choose to amend the proposal. Filing before your EI runs out also prevents the panic of having to negotiate a proposal at zero income, which creates its own complications.

A Licensed Insolvency Trustee can review your complete financial picture in a free initial consultation. There is no obligation to file.

Find a Licensed Insolvency Trustee near you — the first consultation is always free, confidential, and without obligation.