How to File a Consumer Proposal in Canada (Step-by-Step 2026)

Filing a consumer proposal is a structured 6-step process taking 60-75 days from initial consultation to binding agreement, with immediate legal protection stopping collections the day you file—not after the 45-day creditor vote. Licensed Insolvency Trustees handle all document preparation, creditor negotiation, and filing for zero upfront cost, with fees of $1,800-$2,500 paid from your monthly payments.

The 97-99% acceptance rate means rejection is rare. Collections, wage garnishment, and lawsuits stop immediately upon filing, providing instant relief while creditors review your offer.

Step 1: Book a Free Consultation with a Licensed Insolvency Trustee

The consumer proposal process begins with a free consultation with a Licensed Insolvency Trustee. Only LITs regulated by the Office of the Superintendent of Bankruptcy can file consumer proposals under Section 66.12 of the Bankruptcy and Insolvency Act. Debt settlement companies, credit counsellors, and bankruptcy lawyers cannot file proposals.

The consultation lasts 60-90 minutes and is completely confidential with no obligation to proceed. The LIT reviews your complete financial situation including all debts, income sources, monthly expenses, assets like home equity and vehicles, and any special circumstances affecting your finances. They explain all available options including consumer proposals, bankruptcy, debt consolidation, and credit counselling.

Bring a list of creditors with current balances if available, recent pay stubs showing income, and information about assets like home value and mortgage balance or vehicle value and loan balance. If you do not have this information readily available, the LIT can help you obtain it during the document gathering phase.

The LIT calculates what creditors would receive if you filed bankruptcy instead of a proposal. This bankruptcy alternative calculation forms the baseline for your proposal offer, which must exceed bankruptcy recovery by 10-30% to gain creditor acceptance. The LIT explains how much you would pay in a proposal versus bankruptcy, the timeline for each option, and credit impact differences.

All Licensed Insolvency Trustees charge the same federal tariff for services. Shopping for lower fees is not possible, but you can compare communication styles, office locations, and service quality when selecting an LIT.

Learn more about what a consumer proposal is and how the federal legal framework protects you from creditors.

Step 2: Gather Required Documents for Your Proposal

Document gathering typically takes 3-7 days depending on how organized your financial records are. Your Licensed Insolvency Trustee provides a detailed checklist during your consultation. The most important document is a complete list of all debts including credit cards, lines of credit, personal loans, payday loans, tax debt owed to CRA, student loans, medical bills, and any other unsecured obligations.

Include the creditor name, account number, and current balance for each debt. If you are unsure of exact balances, provide estimates and the LIT can contact creditors directly to verify amounts. Missing creditors from your initial list can be added later if discovered.

Proof of income includes pay stubs for the past three months if you are employed, tax returns and Notices of Assessment for the past two years, proof of government benefits like CPP, OAS, disability payments, child tax benefits, or EI, and profit and loss statements if you are self-employed. The LIT needs to verify your income to structure a payment you can afford and to calculate what creditors would receive in bankruptcy.

Asset information includes your home’s current market value and outstanding mortgage balance if you own property, vehicle make, model, year, and current value plus any loan balance, RRSP and TFSA account balances, and significant personal property over $1,000 in value. This information helps the LIT calculate bankruptcy alternative values and structure your proposal offer.

Recent bank statements for the past three months show income deposits and monthly expenses, helping verify income sources and demonstrate financial hardship. Government-issued photo identification and your Social Insurance Number are required for filing with the Office of the Superintendent of Bankruptcy.

Your LIT assists with gathering missing documents and can contact employers, creditors, and government agencies on your behalf if you have difficulty obtaining information. The LIT cannot proceed with filing until all required documents are collected and verified.

Step 3: Review and Approve Your Proposal Terms

Your Licensed Insolvency Trustee drafts your consumer proposal based on the financial information you provided. The proposal offer is calculated to exceed what creditors would receive if you filed bankruptcy instead, typically by 10-30%. This ensures creditor acceptance.

If creditors would receive approximately $5,000 in bankruptcy from asset surrender and surplus income payments, your proposal offer would be $5,500-$6,500 or higher to make acceptance likely. The LIT has extensive experience structuring offers that creditors find acceptable, which explains the 97-99% industry-wide acceptance rate.

You choose your payment term between 1 month and 60 months based on affordability. Longer terms mean lower monthly payments but extend the duration of the R7 credit rating on your report. Shorter terms mean higher monthly payments but faster completion.

For a $40,000 debt with a proposal offer of $12,000 (30%), a 5-year term results in monthly payments of $200. A 4-year term increases payments to $250. A 3-year term requires $333 monthly. Your LIT helps you select a payment and term that fits your budget while maximizing creditor recovery to ensure acceptance.

The proposal documents include the total amount to be paid, monthly payment amount, payment term in months, payment start date, which creditors are included, and the Statement of Affairs listing all assets, debts, and income. Review all terms carefully and ask questions about anything unclear.

Once you approve the terms, you sign the documents authorizing the LIT to file on your behalf. The LIT cannot file without your written authorization. Signing does not obligate you to complete the proposal if creditors reject it—you can withdraw or file bankruptcy instead if rejection occurs.

Calculate your estimated monthly payment based on your current debt level and preferred payment term.

Step 4: Sign Documents and File with the OSB

After approving the proposal terms, you sign several documents required by the Bankruptcy and Insolvency Act. The most important is the sworn Statement of Affairs, a detailed inventory of all debts, assets, income, and expenses. This document is filed with the Office of the Superintendent of Bankruptcy and becomes part of the public insolvency record.

You also sign the consumer proposal document itself, which contains the offer terms and authorizes your Licensed Insolvency Trustee to act as your administrator. The LIT prepares all documents and explains what you are signing. Most LITs allow electronic signing for convenience.

Your LIT files the proposal electronically with the OSB within 24 hours of receiving your signed documents. The OSB assigns a file number and date-stamps the filing. This filing date is critical because it determines when the stay of proceedings takes effect and when the 45-day creditor voting period begins.

The stay of proceedings is automatic under Section 69 of the Bankruptcy and Insolvency Act. It takes effect immediately upon filing, not after creditors vote or approve your proposal. Collection calls must stop, wage garnishment must end, lawsuits cannot proceed, and interest stops accumulating on all debts included in the proposal.

Your LIT sends a Notice of Proposal to all creditors listed in your Statement of Affairs within 5 days of filing. This notice informs creditors of your proposal, the amount they will receive, the payment terms, and their voting rights. Creditors cannot contact you directly for collection once they receive this notice—all communication goes through the LIT.

Wage garnishment typically stops within 24-48 hours or by your next pay period. Your LIT contacts your employer’s payroll department to provide the OSB filing number and legal authority to cease garnishment. Bank account freezes from CRA are lifted within 3-5 business days once CRA receives the Notice of Proposal.

Review complete details about consumer proposal costs and fees that are paid from your monthly payments starting after acceptance.

Step 5: 45-Day Creditor Voting Period

Creditors have 45 calendar days from your filing date to request a meeting of creditors to vote on your proposal. To request a meeting, creditors representing at least 25% of the total proven claims by dollar value must submit written requests to your Licensed Insolvency Trustee.

In most cases, no creditor requests a meeting. If no meeting is requested within the 45-day window, your proposal is deemed automatically accepted without a formal vote. This occurs in approximately 80-85% of consumer proposals.

If a meeting is requested, it must be held within 21 days of the request date. Your LIT chairs the meeting, presents your financial situation and proposal terms, and answers creditor questions. You have the right to attend but are not required to do so—the LIT represents your interests.

Creditors vote based on the dollar value of their proven claims, not the number of creditors. A majority of 50% plus one dollar of the total proven claims is required for acceptance. If you owe $50,000 total and creditors holding $25,001 or more vote in favor, the proposal is accepted even if other creditors vote against it.

Creditors holding secured debt like your mortgage or car loan cannot vote because they are not affected by the proposal—you continue paying them directly. Only unsecured creditors included in the proposal have voting rights.

The 97-99% acceptance rate reflects proper proposal structuring by Licensed Insolvency Trustees. Proposals are drafted to be financially attractive to creditors compared to the bankruptcy alternative, making rejection rare. If your proposal is rejected, you can file an amended proposal with revised terms, file bankruptcy instead, or return to dealing with creditors individually.

During the 45-day voting period, you make no payments to your original creditors. You do not begin making proposal payments to the LIT until after acceptance and court approval. Collections remain stopped throughout this period due to the stay of proceedings.

Compare consumer proposals versus bankruptcy to understand why 78.9% of Canadians choose proposals despite the longer timeline.

Step 6: Court Approval and Begin Monthly Payments

After creditor acceptance, your consumer proposal must receive court approval to become legally binding. Court approval is automatic 15 days after the meeting of creditors or 15 days after deemed acceptance if no meeting was requested, unless a creditor or the Office of the Superintendent of Bankruptcy files an objection.

Objections are extremely rare and typically only occur when the proposal was not filed in good faith, contains fraudulent information, or unfairly prejudices creditors. If an objection is filed, a court hearing is scheduled to resolve the dispute. In the vast majority of cases, no objection is filed and court approval is automatic.

Once court-approved, your proposal becomes a binding legal agreement. You begin making monthly payments to your Licensed Insolvency Trustee according to the approved schedule. The LIT distributes payments to creditors proportionally based on each creditor’s percentage of total debt, after deducting LIT fees according to the federal tariff.

Your LIT sends you a payment statement annually showing total payments made, LIT fees deducted, amounts distributed to each creditor, and remaining balance. You can request an updated statement at any time.

You must complete two mandatory financial counselling sessions during your proposal term. The first session typically occurs within 90 days of filing and covers budgeting, credit management, identifying causes of financial difficulty, and strategies to avoid future debt problems. The second session occurs before your final payment and focuses on rebuilding credit and maintaining financial stability post-proposal.

Each counselling session costs $85 plus tax and lasts approximately 60-90 minutes. These fees are included in your proposal payments, not charged separately. Some LITs offer group counselling sessions while others provide one-on-one counselling.

Upon making your final payment and completing both counselling sessions, your LIT applies to the Office of the Superintendent of Bankruptcy for your Certificate of Full Performance. The certificate is typically issued within 30-60 days and confirms you have fulfilled all obligations under the proposal. This certificate eliminates 60-80% of your original debt permanently.

Send your Certificate of Full Performance to both Equifax and TransUnion to ensure your credit report is updated correctly. The R7 credit notation remains on file for 3 years after completion or 6 years from filing, whichever comes first.

Learn strategies for rebuilding credit after completing your consumer proposal including secured credit cards and timeline expectations.

Complete Timeline: Consultation to Completion

The consumer proposal process spans 3.5-5.5 years from initial consultation to final completion. The filing phase takes 1-2 weeks from consultation to filing. The acceptance phase takes 60-75 days including the 45-day creditor voting period and 15-day court approval. The payment phase lasts 3-5 years depending on your chosen term.

Collections stop immediately upon filing, which occurs within 1-2 weeks of your first consultation. This provides rapid relief for Canadians facing wage garnishment or lawsuits. The 60-75 day acceptance period occurs while you are protected by the stay of proceedings, meaning creditors cannot resume collection actions even though the proposal is not yet approved.

Most proposals are completed in 4-5 years. The R7 credit notation is removed 3 years after completion or 6 years from filing, whichever comes first. For a 5-year proposal, total credit impact is 8 years (5 years payment + 3 years post-completion). For a 3-year proposal, total credit impact is 6 years (the 6-year-from-filing rule applies since 3 years payment plus 3 years post-completion would equal 6 years anyway).

You can accelerate completion by paying off early using tax refunds, work bonuses, or salary increases. Early completion does not reduce total cost but shortens the R7 credit rating duration.

Understand the warning signs that you need a consumer proposal to determine if filing is right for your situation.

What Happens If Your Proposal Is Rejected

Consumer proposal rejection is rare, occurring in only 1-3% of cases according to industry data. Rejection happens when creditors holding more than 50% of proven claims by dollar value vote against the proposal, or when creditors believe the offer is insufficient compared to what they would receive in bankruptcy.

If your proposal is rejected, the stay of proceedings remains in effect for 30 days after rejection. This gives you time to decide on next steps without creditors resuming collection actions immediately. You have three primary options following rejection.

Option one is filing an amended consumer proposal with revised terms. The amendment typically increases the total amount offered or shortens the payment period. The LIT consults with creditors to understand their objections and structures an amended offer likely to gain acceptance. The amended proposal requires a new creditor vote following the same 45-day process.

Option two is filing bankruptcy instead. Bankruptcy discharges 100% of unsecured debt in 9-21 months depending on surplus income, but requires surrendering non-exempt assets and results in a more severe R9 credit rating. Some individuals file bankruptcy after proposal rejection if they cannot afford higher payments in an amendment.

Option three is withdrawing from the insolvency process and returning to dealing with creditors individually. This makes sense only if your financial situation improved significantly during the 60-75 day proposal process, allowing you to afford debt repayment through consolidation or direct negotiation.

Your Licensed Insolvency Trustee advises on the best option based on why creditors rejected your proposal and whether amendments would likely succeed. The LIT’s fees for the original proposal filing still apply even if rejection occurs, paid from your monthly payments if you proceed with an amendment or bankruptcy.

Most rejections result from proposals that offered too little compared to bankruptcy recovery, or from individuals who did not fully disclose income or assets during the drafting phase. Working honestly with your LIT and providing complete financial information prevents rejection.

Compare your options using the consumer proposal hub to understand alternatives and next steps.

---

Bottom Line

Filing a consumer proposal follows a structured 6-step process taking 60-75 days from initial consultation to binding acceptance, with immediate legal protection stopping collections, wage garnishment, and lawsuits the day your Licensed Insolvency Trustee files electronically with the Office of the Superintendent of Bankruptcy. The process requires zero upfront cost—all LIT fees of $1,800-$2,500 are paid from your monthly proposal payments over 3-5 years. Document gathering takes 3-7 days and includes debt lists, income proof, asset information, bank statements, and identification. The 97-99% creditor acceptance rate means rejection is rare when proposals are properly structured to exceed bankruptcy recovery by 10-30%. Collections stop within 24-48 hours of filing and remain stopped throughout the 45-day creditor voting period and 15-day court approval period, even though you are not yet making proposal payments. Calculate your estimated monthly payment to see if a consumer proposal fits your budget and timeline preferences.

This article provides general information and should not be considered legal or financial advice. Find a Licensed Insolvency Trustee for advice specific to your situation.

Last updated: February 2, 2026