Debunking Consumer Proposal Myths

Consumer proposal has been popular with Canadians to deal with problems nowadays. While it can be a good debt relief tool, some misconception surrounding consumer proposals makes it hard for Canadians to risk on consumer proposal. Below are some consumer proposal myths that we will debunk.

Consumer Proposal Myths

1. Consumer proposals are only for people who are deeply in debt.

Consumer proposals can be viable for anyone struggling with their debts, not only for individuals in deep debt. The debt you owe is not a factor when filing for a consumer proposal. What matters is that you have enough income to make the monthly payments required by the proposal.

2. Consumer proposals are the same as bankruptcy.

While it’s true that they are both debt relief options, they are not the same. Bankruptcy is a legal process that involves surrendering your assets to pay off your debts, while a consumer proposal doesn’t require you to submit your assets. A consumer proposal is a settlement between you and your creditor.

3. You will lose your house if you file for a consumer proposal.

In most cases, you can keep your house. However, if you have a lot of equity in your home, you may be required to pay some of it to your creditors as part of the proposal.

4. You will never be able to get credit again.

Consumer proposals can hurt your credit score, but it doesn’t mean you won’t be able to redeem it again. In fact, many people who file for consumer proposals rebuild their credit scores in no time. You may even get a secured credit card while still in the proposal. A secure credit card is an excellent start to rebuilding credit.

5. You must pay back all of your debt if you file a consumer proposal.

When you file a consumer proposal, you will make monthly payments to your creditors but will not have to pay back all of your debt. Your creditors will agree to accept a portion of your debt as full payment. The amount that you will have to pay back will depend on your income, assets, and the amount of debt you owe.

6. You will have to pay high fees.

There can be fees when you file for a consumer proposal, however. They are much lower than the fees associated with bankruptcy. Your licensed insolvency trustee will provide a clear breakdown of the costs of filing a consumer proposal.

7. You can only file for consumer proposal once.

You can file more than once if necessary, but you have to wait for a certain amount of time, depending on the terms of your previous consumer proposal, before you can file again. Remember, you can file more than once, but you must start managing your finances well to prevent another need for a consumer proposal.

8. Your employer will find out if you file for a consumer proposal.

They won’t if you are conscious that your employer will find out about your consumer proposal. It is a private matter, and trustees won’t disclose your information to anyone without consent.

9. You will have to sell your assets.

You will not have to sell your assets if you file a consumer proposal. In fact, you will be able to keep most of your assets, including your home, car, and personal belongings.

10. You will have to make payments for the rest of your life.

The length of your payment will depend on how much you owe, your income and the term of the proposal. You will not have to pay for the rest of your life. Typically, a consumer proposal has 3-5 years of payment length.

Pros and Cons of Consumer Proposal

Before filing for consumer proposal, you need to weigh first the advantage and disadvantage of consumer proposal. You must know how it will affect you in the long run.

Pros of Consumer Proposal:

1. Reduced Debt Payment. Consumer proposals can be the best option to reduce debts. It will allow you to negotiate with your creditor making it more manageable to pay off your debts.
2. No interest. Consumer proposals are interest-free, meaning you can save money in the long run and reduce your debt.
3. Protection From Collection Action. When you file for a consumer proposal, you are protected from creditor collection action. It will be more stress-free and will give you more sense of relief.
4. No Surrender of Assets. Unlike bankruptcy, you are not required to surrender your assets when you apply for a consumer proposal. You get to keep your possessions and avoid the asset liquidation process required in bankruptcy.

Cons of Consumer Proposal:

1. Impact on credit score. Remember that filing a consumer proposal can hurt your credit score. It will be difficult to obtain credit, and you will get worse interest-rate deals. However, it is possible to rebuild your credit.
2. Public record. Consumer proposals are a matter of public record, meaning your financial information will be available to anyone searching for it. This can be not very comfortable and may affect your future job prospects.
3. Limited Eligibility. Only some people are eligible for a consumer proposal. You must owe at least $1,000 in debt and have a regular source of income to qualify.
4. Longer Payment Period. Consumer proposals require a more extended payment period than other debt-relief options. You may be required to make payments for up to 5 years, which can be a significant commitment.


There are various myths and misconceptions about consumer proposals in Canada, so doing your research is essential before taking risks. Understand the facts and ensure that it is the perfect decision for debt relief for you. If not, you’ll be seeing yourself in the worse case.

Consult a licensed insolvency trustee to learn more about your debt. They will provide you guidance to make decisions about your financial future. Hope that debunking these consumer proposal myths helps with your research.

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