Debt Relief Solution
Consumer Proposal: Settle Debt Without Bankruptcy
A formal offer under the Bankruptcy and Insolvency Act filed by a Licensed Insolvency Trustee (LIT).
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We’ll match you with a Licensed Insolvency Trustee (LIT) in your province.
What It Is
What it is
- A formal agreement under the Bankruptcy and Insolvency Act (BIA) to repay a portion of your unsecured debt over up to 60 months.
- Must be filed by a Licensed Insolvency Trustee (LIT).
- Filing triggers a stay of proceedings—most lawsuits, wage garnishments, and collection calls must pause.
Advantages and Considerations
Advantages
Benefits
- Interest stops on included unsecured debts.
- One fixed monthly payment you can afford; up to five years.
- Keep assets (e.g., home, car) if you remain current on secured loans linked to them.
- Legal protection while active; transparent fees regulated by the OSB and built into payments.
Considerations
Considerations
- Requires creditor acceptance (majority by dollar value) and terms can be negotiated.
- Credit report shows an R7‑type indicator; typically removed 3 years after completion or 6 years from filing (whichever comes first).
- Student loans less than 7 years from your end‑of‑study are not discharged (any remaining balance survives).
Eligibility Requirements
Eligibility
- Individuals with total unsecured debt under $250,000 (excluding mortgage on principal residence).
- Insolvent but able to afford the proposed monthly payment.
Costs & Fees
Costs
- No upfront fees. LIT fees are set by regulation and included in your monthly payment.
- Payment depends on your budget, total debt, and what creditors would receive in bankruptcy.
Credit Impact
Impact on credit
- Reports as an R7‑type indicator.
- Typically removed 3 years after completion or 6 years from filing. You can rebuild with on‑time payments and secured credit.
Included and Excluded Debts
Understanding which debts qualify for this solution
Included Debts
- Credit cards, lines of credit, payday/installment loans, many tax debts, student loans > 7 years since end‑of‑study
Excluded Debts
- Secured debts (mortgage, car loans), alimony/child support, court fines/penalties, student loans < 7 years since end‑of‑study
Get Matched with a Debt Professional
Enter your total unsecured debt to preview a proposal payment range before you talk to an LIT.
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This quick estimate doesn’t affect your credit. It’s informational—an LIT confirms details.Step-by-Step Process
How it works
- Free consult with an LIT; review budget and debts.
- Draft & file your proposal → stay of proceedings starts.
- Creditors vote within 45 days; terms finalized if accepted.
- Pay monthly (up to 60 months) and attend 2 financial‑education sessions.
- Completion → remaining included balances are discharged.
Preparation Checklist
- Government ID
- Proof of income & monthly budget
- Statements for all debts
- Any legal notices (garnishments/collections)
Timeline and Duration
- Week 0–1: consult & budget
- Week 1–2: file; collections pause
- By day 45: creditor voting
- Months 1–60: fixed payments & education
- Completion: discharge of included balances
Alternative Solutions
- Debt Management Plan (DMP): interest relief, repay 100% principal.
- Debt consolidation loan: one new loan if you qualify.
- Bankruptcy: when repayment isn’t feasible.
FAQs
Will I keep my house and car? Usually yes if you keep secured payments current and there’s no unusual equity issue. What if calls continue? Collections on included debts must stop—refer any calls to your LIT.Important Warning
Avoid any company that claims it can file a proposal without an LIT or erase debt for a fee. Only LITs file proposals under the BIA.
Common Myths and Misconceptions
- Myth: You’ll automatically lose your house — Reality: Proposals deal with unsecured debt; keep secured payments current.
Provincial Variations
Debt relief rules differ by province. Expand any province to see key details and service-specific notes.
Alberta
British Columbia
Manitoba
New Brunswick
Newfoundland and Labrador
Nova Scotia
Ontario
Prince Edward Island
Québec
Saskatchewan
References
- OSB overview & $250k limit: https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/your-finances-are-serious-trouble
- OSB on stay of proceedings: https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/you-owe-money/creditors-contacting-you-after-you-file-bankruptcy-or-proposal
- OSB on consumer proposals (5‑year limit): https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/you-are-owed-money/you-are-owed-money-consumer-proposals
- OSB Form 37.1 (45‑day voting): https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/licensed-insolvency-trustees/forms/form-371-voting-letter-consumer-proposal
- Equifax Canada retention: https://www.equifax.ca/personal/education/personal-finance/articles/-/learn/how-long-does-information-stay-on-my-credit-report/
- OSB on student loans & 7‑year rule: https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/sites/default/files/attachments/2022/Bankruptcy-Student-Loans-Discharge-BC_EN_2014-06.pdf