- Only a Licensed Insolvency Trustee (LIT) can administer a consumer proposal or a bankruptcy, and the federal regulator says LITs typically don’t charge for the first consultation.
- A consumer proposal is open if your debts are $250,000 or less, not counting the mortgage on your home, and it can’t run longer than 5 years.
- A first bankruptcy ends after 9 months, or 21 months if your surplus income is $200 a month or more. You pay 50% of that surplus.
- Equifax and TransUnion drop a proposal 3 years after you finish paying or 6 years after you sign, whichever comes first.
- A first bankruptcy stays 6 years after discharge, or 7 years on TransUnion in Newfoundland and Labrador, Ontario, PEI and Quebec.
Checked October 2026
Who can file a consumer proposal or bankruptcy?
Only a Licensed Insolvency Trustee. The Office of the Superintendent of Bankruptcy (OSB) puts it plainly: LITs “are the only professionals authorized to administer government-regulated insolvency proceedings.” That covers both a consumer proposal and a bankruptcy. A debt consultant, lender or settlement company can’t file either one for you.
The OSB also says “typically, LITs do not charge for the first consultation,” and that LIT fees for consumer insolvencies are regulated by the federal government. Before you pay anyone for debt help, check their name in the OSB’s Licensed Insolvency Trustee registry.
How does a consumer proposal work?
A consumer proposal is a legal offer to your unsecured creditors to repay part of what you owe, through an LIT, over no more than 5 years. You can use one if your total debts are $250,000 or less, not counting a mortgage on your principal residence.
- The trustee files your offerThe amount is based on your assets, your surplus income and what creditors are likely to accept. From filing, you stop paying unsecured creditors directly, and wage garnishments and lawsuits stop.
- Creditors get 45 daysCreditors holding at least 25% of the value of proven claims can ask for a meeting. If nobody does within 45 days, the proposal is deemed accepted, even over objections.
- If there’s a meeting, dollars voteIt’s held within 21 days of being called. Votes are weighted by the dollar value of each creditor’s claim, and a simple majority (50% plus one) decides.
- You make the paymentsYou attend two counselling sessions. Miss three monthly payments and the proposal is deemed annulled. Finish it and you’re released from the debts it covered.
Two separate rules are at work in the creditor stage, and they’re easy to mix up. The 25% figure only decides whether a meeting happens. Approval at a meeting is a separate majority vote by dollar value.
Here is an illustration only. Say you owe $40,000 on cards and loans, and your trustee files a proposal to pay $15,000 over 60 months. That’s $250 a month, and you keep your car and home as long as you keep paying any loan secured on them. The real figure is set with your trustee and has to win creditor acceptance.
What is bankruptcy and how long is it?
In a bankruptcy, the trustee takes your assets beyond those exempt under provincial and federal law, sells them and pays your creditors. Exempt property, such as household goods, clothing and tools of your trade, is set by each province. Some RRSPs and pension plans are also exempt.
You attend two financial counselling sessions. If no one opposes it, you’re discharged automatically, and the timing depends on whether it’s your first bankruptcy and on your surplus income.
| Bankruptcy | Surplus income under $200 a month | Surplus income $200 a month or more |
|---|---|---|
| First | 9 months | 21 months |
| Second | 24 months | 36 months |
| Third or later | Set by the court | Set by the court |
Source: OSB, Considering bankruptcy and Compare debt solutions. Discharge can be delayed if a creditor or the trustee opposes it.
Surplus income: why bankruptcy can take 21 months
Surplus income is your monthly net income above a standard the OSB sets each year for your family size. If it’s $200 a month or more, you pay 50% of it to your trustee, and a first bankruptcy runs 21 months instead of 9. These are the standards from Directive No. 11R2-2026, in force from March 27, 2026.
| People in the family | Standard |
|---|---|
| 1 | $2,716 |
| 2 | $3,381 |
| 3 | $4,157 |
| 4 | $5,047 |
| 5 | $5,724 |
| 6 | $6,456 |
| 7 or more | $7,188 |
The OSB updates these every year. Your trustee also adjusts for your family situation.
- Single person earning $3,216 a month net: surplus is $500, so the payment is $250 a month for 21 months, $5,250 in all.
- Single person earning $2,816 a month net: surplus is $100, under $200, so there’s no payment and the bankruptcy can end at 9 months.
Which debts doesn’t bankruptcy wipe out?
A discharge clears most unsecured debt, such as credit cards, lines of credit and unsecured loans. The OSB lists debts a bankruptcy discharge doesn’t release:
- Alimony and child support payments.
- Student loans, if you stopped being a full- or part-time student less than 7 years ago. The court can cut that to 5 years for undue hardship.
- Court-ordered fines or penalties.
- Debts arising from fraud.
A loan secured on an asset, like a car loan or a mortgage, is tied to that asset. Keep paying it if you want to keep the asset. Ask your trustee how your own secured debts would be treated in a proposal or a bankruptcy.
Consumer proposal vs bankruptcy side by side
| Consumer proposal | Bankruptcy | |
|---|---|---|
| Who files it | Licensed Insolvency Trustee only | Licensed Insolvency Trustee only |
| Debt limit | $250,000, not counting a mortgage on your home | None |
| How long it lasts | Up to 5 years | 9 to 36 months for a first or second bankruptcy |
| What you repay | An agreed share of your debts | Non-exempt assets plus 50% of any surplus income |
| Your assets | You keep them | Non-exempt assets are sold |
| Creditor say | Can request a meeting and vote | No vote; can oppose the discharge |
| Collections and garnishments | Stop once filed | Stop once filed |
| Counselling | Two sessions | Two sessions |
| Equifax credit report | 3 years after payoff or 6 years after filing, whichever is first | 6 years after discharge |
| TransUnion credit report | 3 years after payoff or 6 years after signing, whichever is first | 6 years after discharge; 7 years in NL, ON, PE and QC |
Sources: OSB, FCAC and Equifax Canada, checked October 30, 2026. A second bankruptcy stays 14 years.
- Proposal: you keep your assets and creditors usually get more than in a bankruptcy.
- Proposal: on a full 5-year term it can leave your credit report about 1 year after your last payment.
- Bankruptcy: a first one with no surplus income can be over in 9 months.
- Proposal: creditors can reject it, and missing three payments annuls it.
- Bankruptcy: non-exempt assets are sold, and surplus income adds payments.
- Bankruptcy: a second one stays on your credit report for 14 years.
How long it stays on your credit report
Both bureaus remove a consumer proposal 3 years after you’ve paid off the debts in it, or 6 years after you sign, whichever comes first. On a full 5-year proposal, the 6-year date wins, so it drops off about 1 year after your last payment. Pay it off in year 2 and it can go at year 5.
A first bankruptcy stays 6 years after discharge. TransUnion keeps it 7 years in Newfoundland and Labrador, Ontario, Prince Edward Island and Quebec, FCAC says. A 9-month first bankruptcy therefore shows for about 6 years and 9 months from filing, or 7 years and 9 months on TransUnion in those provinces. Equifax keeps a bankruptcy with no discharge date for 7 years from filing. More than one bankruptcy stays 14 years.
Check both reports after the date passes. Our guide on how to read a credit report shows where the entry appears, and Equifax vs TransUnion covers how the two bureaus differ.
Rebuilding your credit afterwards
The OSB says a filing generally gives you the lowest possible credit rating. Rebuilding starts with new on-time history, and it can begin while the proposal or bankruptcy is still on your file.
Start with a secured card
A secured credit card uses a deposit as your limit, and payments are reported to the bureaus.
Keep balances low
Pay in full each month and keep your credit utilization low.
Budget before borrowing
A budget calculator shows whether new payments fit before you take them on.
Watch the score climb
See what a good credit score is and check your reports for errors.
Frequently Asked Questions
Who can file a consumer proposal in Canada?
Only a Licensed Insolvency Trustee. The OSB says LITs are the only professionals authorized to administer government-regulated insolvency proceedings, which include consumer proposals and bankruptcies. You can check any trustee’s name in the OSB’s public registry.
Does it cost anything to talk to a Licensed Insolvency Trustee?
Usually not for the first meeting. The OSB says LITs typically don’t charge for the first consultation, and their fees for consumer insolvencies are regulated by the federal government.
How much debt can you have for a consumer proposal?
Up to $250,000, not counting a mortgage secured by your principal residence. Above that, a trustee can file a Division I proposal instead, and if creditors reject a Division I proposal you are automatically bankrupt.
How long does a consumer proposal last?
No more than 5 years. Creditors have 45 days to accept or reject it, and missing three monthly payments means it’s deemed annulled.
How long does a consumer proposal stay on your credit report?
Equifax and TransUnion remove it 3 years after you’ve paid off the debts in it, or 6 years after you sign, whichever comes first. On a full 5-year proposal, that’s about 1 year after the last payment.
How long does bankruptcy stay on your credit report in Canada?
A first bankruptcy stays 6 years after discharge. TransUnion keeps it 7 years in Newfoundland and Labrador, Ontario, Prince Edward Island and Quebec. A second bankruptcy stays 14 years.
Does bankruptcy clear student loans?
Only if you stopped being a full- or part-time student at least 7 years before filing. The court can shorten that to 5 years if repaying would cause undue hardship.
What is surplus income in a bankruptcy?
It’s your monthly net income above the OSB’s standard for your family size. For 2026 the standard for one person is $2,716. If your surplus is $200 or more, you pay 50% of it and a first bankruptcy lasts 21 months instead of 9.
Can I keep my house in a consumer proposal?
Generally yes. The OSB says you keep assets such as your house and car in a consumer proposal as long as creditors accept it, you follow its terms and you keep paying your secured creditors.
Try this next
Sources, checked October 2026
- OSB: What is a Licensed Insolvency Trustee? ised-isde.canada.ca
- OSB: Consumer proposals ised-isde.canada.ca
- OSB: Considering bankruptcy ised-isde.canada.ca
- OSB: Compare debt solutions ised-isde.canada.ca
- OSB: Student loans and bankruptcy ised-isde.canada.ca
- OSB: Consumed by debt? Information for consumers on the insolvency process ised-isde.canada.ca
- OSB: Directive No. 11R2-2026 Surplus Income ised-isde.canada.ca
- FCAC: What's in your credit report and how long it stays canada.ca
- Equifax Canada: How long does information stay on my credit report? equifax.ca
General information for Canadians, not financial, tax or legal advice. Rules and menus change, so confirm details with your bank, lender or the Government of Canada. See our methodology.