Wednesday, September 9, 2026
See why consumer proposals are more popular than bankruptcy in Canada. Learn how they work, they protect assets, and how they help you become debt-free.
Consumer proposals have become the dominant method of dealing with insolvencies in Canada, despite the fact many Canadians have never heard of them. While bankruptcy is the more commonly known concept, the numbers show that consumer proposals have become the preferred option for many.
Bankruptcy, once seen as the default option, is no longer the most common path forward.
This shift raises important questions. Why are consumer proposals becoming so much more popular? What makes them a better fit for many Canadians compared to bankruptcy? We answer these questions below.
In the first quarter of 2026 there were a total of 37,121 insolvencies filed by everyday Canadians, according to the Office of the Superintendent of Bankruptcy.
Of those, 29,545 (79.5%) were resolved using a consumer proposal.
Only 7,576 (20.5%) required bankruptcy.
This shows an overwhelming number of Canadians are turning to consumer proposals when facing major financial issues.
So, why is this? What makes the consumer proposal regularly used over three-quarters of the insolvencies filed by Canadians?
Consumer proposals allow you to keep all your possessions, including your home and vehicle, making them a far more attractive option than bankruptcy for most Canadians.
When you file a consumer proposal, you retain ownership of your house, car, investments, and your personal belongings.
Simply put, you get to keep everything you own after filing a consumer proposal.
Because consumer proposals deal only with unsecured debts, (debt not backed by an asset) you don’t have to worry about losing secured assets like your home or vehicle as part of the process.
Credit card debt, personal loans, and payday loans are examples of unsecured debt that can be included in a proposal.
Knowing that you can keep your home, car, and other possessions takes away one of the biggest fears people have about filing for insolvency. It gives them a layer of peace of mind while they work toward becoming debt-free.
Bankruptcy operates very differently from a consumer proposal when it comes to what happens to possessions.
Filing bankruptcy may force you to surrender non-essential assets that exceed provincial exemption limits. If your home equity surpasses the allowed exemption amounts, you might need to sell your house or arrange to buy back the excess equity.
Vehicle ownership in bankruptcy also faces restrictions. While you can typically keep a modest vehicle for transportation, you may have to surrender a car if it’s considered beyond what you need. For example, if you have multiple cars, you may be required to surrender one of them.
Consumer proposals cause less damage to your credit score, meaning it’s easier for you to recover it than bankruptcy, making them the better choice for protecting your financial future.
Credit scores in Canada range between 900 and 300. A score of 900 is a perfect credit score; 300 is the lowest. TransUnion and Equifax are the two largest credit bureaus in Canada and are responsible for tracking your credit history and maintaining your credit report.
It’s impossible to predict exactly what someone’s credit score will be after filing a consumer proposal. Usually, a drop between 100 and 200 points is common.
Filing a consumer proposal will also automatically drop your credit rating down to R7, which shows you’re actively participating in a formal debt management program.
You can recover both your credit score and rating, though. Paying your bills in full and on time is one of the best ways to improve your credit score over time.
You can begin to rebuild your credit score and rating even while you’re completing a consumer proposal.
A consumer proposal will be removed from your credit report either:
Filing for bankruptcy will drop your credit rating to an R9, the lowest possible. It shows lenders you’ve had to declare bankruptcy to deal with your financial difficulties.
Bankruptcy often requires you to complete the whole process before you can begin to start to rebuild your credit score and rating.
A bankruptcy can also stay on your credit report longer than a consumer proposal.
Usually, Equifax and TransUnion will remove it six years after the date you’ve officially completed your bankruptcy.
However, TransUnion will keep it on your credit report for seven years after you’ve completed the bankruptcy in the following provinces:
One of the biggest advantages of filing a consumer proposal is the significant reduction in your monthly debt payments.
To file a consumer proposal, you must work with a Licensed Insolvency Trustee, who then negotiates with your creditors to lower the total amount you owe.
A consumer proposal can lower your payments by up to 80%. Even a 30% cut can make a huge difference for many Canadians.
Most consumer proposals last for five years, which spreads the reduced balance into smaller, more manageable monthly installments.
Each consumer proposal is unique and customized to your individual financial situation.
As every person’s debt, income, and expenses are unique, your licensed insolvency trustee will create a proposal that reflects your situation.
When putting together a consumer proposal, the Licensed Insolvency Trustee reviews your full financial picture, including how much you owe and what you can realistically afford to pay each month.
The trustee ensures that your monthly payments are an amount you can pay. You'll only be required to make payments that fit your budget.
When you file a consumer proposal, debt collection calls and letters stop immediately.
This happens because the proposal triggers a legal stay of proceedings, which prevents creditors and debt collectors from contacting you.
Filing a consumer proposal means no more harassing phone calls, threatening letters, or lawsuits about your unsecured debts. It also stops wage garnishments.
A consumer proposal gives people a way to reduce their debt without losing their assets, helps them rebuild their credit faster, and is customized to suit their needs.
If you’re struggling with debt, we can help. Our Licensed Insolvency Trustees can assess your financial difficulties and help you determine the best path forward. They can also file a consumer proposal on your behalf to help lower your debt payments.
Our trustees take a compassionate, judgment-free approach to helping you get out of debt. They’re here to listen to your story and help you find the best solution.
Wednesday, September 9, 2026
See why consumer proposals are more popular than bankruptcy in Canada. Learn how they work, they protect assets, and how they help you become debt-free.
