The Pros and Cons of Consumer Proposals

Consumer proposals are a great alternative to bankruptcy, not only are they a good debt solution they also protect your assets as well. But there are some drawbacks to choosing a consumer proposal over other debt management solutions. 

But what are the pros and cons of choosing consumer proposals? As they’ve grown in popularity over the years, it’s important to understand what they are and the pros and cons of them. 

What is a consumer proposal?

A consumer proposal is an alternative  and less severe alternative to bankruptcy. This debt solution allows you to consolidate your unsecured debts and pay all or a portion of it back in interest-free monthly installments.

A consumer proposal is prepared by a Licenced Insolvency Trustee (LIT) and sent to your creditors in order to negotiate your terms. If you choose to go with a consumer proposal, you will protect your assets from creditors. 

Pros of a Consumer Proposals

There are several key advantages to consumer proposals which include the following. 

You keep your assets 

One of the main and most important pros of consumer proposals is that you keep your assets and they are legally protected. Some examples of assets you can keep can include your house, car, tax refunds, investments and more. 

Lower monthly payments 

In consumer proposals, your LIT will negotiate with your creditors to find a suitable monthly payment that works for both parties. It’s not uncommon for creditors to agree to a reduced or partial repayment. But this does depend on a variety of factors, which means there’s a possibility for you to get out of debt sooner and for less money than what you owe.

Creditor protection 

Once a proposal is approved by your creditors, your proposal will provide you with creditor protection which prevents them from garnishing your wages, filing lawsuits against you or calling you about collection. 

Avoid serious credit damage

With consumer proposals, you avoid more severe damage that can be caused by bankruptcy, debt settlement or by simply not paying your payments/debt. 

Keep in mind once agreed upon, your payments will be fixed and cannot go up, regardless if your financial situation improves.

Cons of a Consumer Proposals

Some of the cons of consumer proposals can include the following. 


One factor that is distinct to consumer proposals is the timeframe surrounding them. Proposals usually take longer to complete than bankruptcy. Lower monthly payments means it is stretched over a longer period to pay back, but if your financial situation improves you can pay off your consumer proposal sooner.

More Expensive than other options

When it comes to debt relief options, consumer proposals are one of the more expensive options. The cost of a consumer proposal is $1,500 for the filing fee and an additional fee of 30% of your future payments.

Credit rating is still affected  

A consumer proposal does affect your credit, it will register as an R7 rating and remain on your credit report for 3 years after completion. 

Proposal terms and Legally bound

With consumer proposals, because they are legally binding for both your and your creditors, you must adhere to all payments and agreements outlined. You cannot miss payments or fall behind otherwise the proposal will be annulled and terminated.  It’s also worth noting that consumer proposals are a part of your permanent public record. 

Can only be prepared by a Licenced Insolvency Trustee

Only an LIT can act as a Consumer Proposal administrator. If you think a Consumer Proposal is the right solution for you, the next step is to talk with a Licensed Insolvency Trustee. Contact us today to find out if a Consumer Proposal is right for you.

Debts Eligible for a Consumer Proposal

A consumer proposal can be used for most types of unsecured debt. This includes:

Most types of debt can be included in consumer proposals, as long as they are unsecured debts. Secured debts would be things like your mortgage or a car loan since they have collateral. 

Examples of unsecured debts includeL

  • Credit cards
  • Lines of Credit (LOCs)
  • Store credit cards or credit lines
  • Unsecured personal loans
  • Collection accounts

Examples of secured debts include:

  • Mortgages
  • Home equity loans and lines of credit
  • Car loans
  • Student debts (unless you’ve been out of school for more than 7 years)