Sometimes life can throw you a curveball, shifting you from financial security to feeling overwhelmed by debt. Let’s look at a real-world example of how we helped a local BC resident reduce their debt by 73% using a consumer proposal.

The Situation

We began working with a 32-year-old single resident of British Columbia who worked in healthcare and was unable to work full-time due to mental health issues. On top of this, unexpected veterinary bills for their pet had to be charged to their credit card. 

As a result, their total unsecured debt exceeded $100,000.

What is a Consumer Proposal?

We filed a consumer proposal on their behalf. A consumer proposal is a formal debt relief option available in Canada, where a Licensed Insolvency Trustee (LIT) negotiates with creditors to reduce the total debt and establish manageable payment terms. It serves as an alternative to bankruptcy.

A consumer proposal consolidates your debt into a single monthly payment, always halting interest accrual and creditor calls. It also has a less severe impact on your credit score compared to bankruptcy.

To qualify, you must be a Canadian resident with total debt less than $250,000 (excluding a mortgage on your principal residence).

Consumer Proposal in BC: What You Should Know

In British Columbia, consumer proposals are governed by federal insolvency law and administered by Licensed Insolvency Trustees. While the legislation is national, working with a trustee who understands the financial realities in BC matters.

Cost of living, housing prices, and wage levels in British Columbia often affect what creditors consider a reasonable repayment offer. A Licensed Insolvency Trustee in BC will assess your income and expenses within the context of local standards when preparing your proposal.

If you are searching for a consumer proposal in BC, the first step is a confidential consultation with a federally regulated trustee who serves residents across British Columbia.

What Debts Can Be Included in a Consumer Proposal?

A consumer proposal applies to unsecured debts. Unsecured debt is money owed that is not tied to a specific asset, such as a home or vehicle. If there is no collateral attached, it can usually be included.

Common examples include:

Credit cards: All outstanding balances at the time of filing, including Visa, Mastercard, American Express, and retail cards.

Personal loans and lines of credit: Unsecured bank loans, consolidation loans, and lines of credit that are not backed by an asset.

Payday loans and installment loans: Short-term advances and high-interest installment loans obtained from payday lenders.

Income tax debt: Amounts owed to the Canada Revenue Agency, including personal income tax, GST debt, benefit overpayments, penalties, and accumulated interest. These debts are generally unsecured and can often be included in a consumer proposal. However, some amounts, such as certain GST or payroll-related obligations, may be treated differently under CRA rules. A Licensed Insolvency Trustee can review your situation and confirm what can be included. 

Student loans: These can be discharged if your end date of studies was at least seven years before filing. This date is very specific and is based on when you officially stopped being a student, not when you graduated or last made a payment. If it has been less than seven years, the debt may still be included in a proposal for repayment purposes, but it will not be fully discharged. Because even a small difference in dates can affect eligibility, it is important to confirm your end date of studies directly with your lender or a Licensed Insolvency Trustee. 

Advantages and Disadvantages of Filing a Consumer Proposal

Every debt relief option has trade-offs. A consumer proposal can provide meaningful structure and protection, but it is not the right fit for every situation. Understanding both the benefits and the limitations is an important part of making an informed decision.

Advantages

Compared to negotiating on your own, a consumer proposal creates legal structure and certainty. Once accepted, it binds all unsecured creditors. Collection calls stop, legal action is paused, and you make one fixed monthly payment.

Unlike informal debt settlement plans, a consumer proposal is legally binding on all creditors once approved. It can reduce the principal balance owed, includes CRA debt, and automatically stops most collection activity without requiring individual creditor agreement.

Compared to bankruptcy, a consumer proposal is generally less intrusive. Assets are typically retained, payments remain fixed even if income increases, and tax refunds or unexpected funds are not taken. It also has a less severe long-term impact on credit and can be paid off early.

For individuals who can afford a structured repayment plan, a consumer proposal can offer flexibility while avoiding the more significant consequences of bankruptcy.

Disadvantages

A consumer proposal is a formal legal process and carries long-term implications. It becomes part of the public insolvency record and will affect your credit rating for several years. Creditors have the right to vote on the proposal and may reject it, which could require revised terms or consideration of other options.

Secured debts, such as mortgages and vehicle loans, cannot be included, and student loans less than seven years old are not automatically discharged. If a consumer proposal falls three or more payments behind schedule, it may be automatically annulled and creditor protection can end. In some professions, insolvency filings may also trigger reporting requirements or affect licensing. 

While many people view a consumer proposal as less severe than bankruptcy, it is still a formal legal proceeding. It should be considered carefully, with a full understanding of both its protections and its long-term implications.

A Licensed Insolvency Trustee will review your full financial picture and explain how these advantages and disadvantages apply specifically to your circumstances before any decision is made.

How Much Does a Consumer Proposal Cost in BC?

Licensed Insolvency Trustee fees are regulated under federal law and are built into your proposal. You are not charged separate or upfront fees for trustee services, and your monthly payment is a single, fixed amount.

The amount you pay in a consumer proposal is based on your financial situation. To determine this, your Licensed Insolvency Trustee will first look at what your creditors would likely receive if you filed for bankruptcy. From there, a proposal is created that offers your creditors a better outcome, while still being manageable for you.

This is why proposal payments can vary from person to person. Your income, expenses, assets, and total debt all play a role in determining what is considered a reasonable and sustainable payment.

There is no cost for an initial consultation, and no additional interest is charged on the unsecured debts included in the proposal. Your payment remains consistent throughout the term, giving you a clear and predictable path toward becoming debt-free.

What If You Miss Payments?

If your proposal falls three full payments behind schedule, it is automatically annulled and creditor protection ends. Collection activity can resume.

If your financial situation changes, it is important to contact your Licensed Insolvency Trustee as soon as possible. Depending on your circumstances, there may be options to adjust your proposal or address missed payments.

In some cases, a proposal can be amended to reflect a change in your ability to pay. If a proposal has already been annulled due to missed payments, it may be possible to revive it, depending on the timing and your situation.

Back to the story – The Results

After filing the consumer proposal, our client saw their debt decrease from $100,000 to $27,000, with monthly payments of $450. This significant reduction provided our client with a clear path forward and relief from overwhelming debt.

With simple monthly payments and no additional interest charges, they could start rebuilding their credit and look towards a more secure financial future.

Is a Consumer Proposal the Right Option for You?

A consumer proposal may be appropriate if your total debt is $250,000 or less, excluding the mortgage on your principal residence. This limit includes both secured and unsecured debts, even though secured debts like car loans are not included in the proposal itself. If your debt exceeds this amount, other formal options may still be available. 

It may also be worth considering if you:

• Need more time and a structured plan to repay what you owe
• Want interest to stop and collection actions, including wage garnishments, to end
• Are trying to avoid bankruptcy
• Want to keep assets that could be at risk in a bankruptcy

A consumer proposal is designed for individuals who have steady income but cannot realistically repay their debts in full.

If you are feeling the weight of debt we are here to help. A Licensed Insolvency Trustee (LIT) is a professional licensed by the Office of the Superintendent of Bankruptcy Canada (OSB) to help you manage financial difficulty through insolvency. We treat you like a person, not just a number.  Book your free consultation to get started. 

Frequently Asked Questions About Consumer Proposals in BC

How long does a consumer proposal last in BC?
Up to five years, but it can be paid off early.

Does a consumer proposal stop wage garnishment?
Yes. Once filed, a legal stay of proceedings stops most garnishments and collection actions.

Will a consumer proposal affect my credit?
Yes. It is reported on your credit file, but it is generally less severe than bankruptcy.

Can I keep my house in a consumer proposal in BC?
Yes, provided you continue making your mortgage payments and any equity is addressed in the proposal terms.