How to Escalate a Consumer Complaint in Canada
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How to Start a Consumer Proposal in Canada
Starting a consumer proposal in Canada runs through a Licensed Insolvency Trustee: the assessment, the offer to creditors, filing with the Office of the Superintendent of Bankruptcy, the 45-day creditor period, and the two counselling sessions.
Applies in: across Canada
A consumer proposal is a formal offer to creditors, made under the Bankruptcy and Insolvency Act, to pay a percentage of what is owed over a specific period, to extend the time to pay, or to do both. Creditors vote to accept or reject it. This guide describes the process only: who runs it, who is eligible, what is filed, what happens in the 45 days after filing, and what the debtor must do until the proposal is complete. It does not advise any person on whether to file one, and it does not compare debt options for a particular situation. Those questions belong in the trustee meeting described in Step 1, where the trustee assesses the specific debts, assets, income, and expenses in front of them.
The one institutional fact to fix first is who can act. A consumer proposal is filed and administered by a Licensed Insolvency Trustee, licensed by the federal Office of the Superintendent of Bankruptcy (OSB) and an officer of the court. The Financial Consumer Agency of Canada states that only a qualified Licensed Insolvency Trustee can help with a consumer proposal or bankruptcy, that it is illegal for a company to claim it can manage a consumer proposal or bankruptcy if it does not employ one, and that a trustee's advice on these two options is typically free. Debt advisors and credit-repair companies may offer to help, but they cannot file or administer the proposal themselves. If a company says it will file on a debtor's behalf, the question to ask is whether it employs a Licensed Insolvency Trustee.
Step 1: Meet a Licensed Insolvency Trustee
The trustee starts by assessing the financial situation. The Financial Consumer Agency of Canada describes the first meeting as an assessment the trustee typically provides free of charge, covering debts, assets, income, and expenses. The OSB's description of the process is more specific about what the trustee produces: a full inventory of the debtor's income and expenses, assets and liabilities, and creditors, set out in a proposal with the debtor's offer.
Eligibility is checked at this stage, not assumed. The OSB states the consumer proposal limit as owing less than $250,000, excluding mortgages. The Act provision the OSB cites in its position papers expresses the same limit as up to $250,000, not including a mortgage on the debtor's principal residence. The debtor must also be an insolvent person, which the OSB defines as a person unable to pay their debts when they are due. A trustee also confirms which debts the proposal would cover, because not every debt is an unsecured debt included in a proposal, and secured debts and support obligations are treated differently, as the stay-of-proceedings section below explains. The trustee's file is the record the creditors will read, so debts, assets, and income disclosed here need to be complete. The OSB lists disclosure of all assets and debts to the trustee among the bankrupt's duties; for a proposal debtor, the equivalent duty is to assist the trustee in administering the proposal and to give the trustee the information the filing requires.
Step 2: Build the offer with the trustee
The proposal itself is the offer. The OSB describes it as a proposal to creditors that the debtor will pay a percentage of the amount owed. In practice the offer takes one of three shapes: a reduced total repaid over time, the full amount repaid over a longer period, or a combination of the two. The trustee drafts the offer from the inventory prepared in Step 1, and the debtor signs it. The proposal must provide that its performance is completed within five years. That five-year figure is a ceiling set by the Act, not a recommended term and not a typical term; the filed proposal states the actual payment schedule, and a proposal whose terms are met sooner ends sooner.
Fees are part of the administration, and this guide does not quote a fee figure, because no trustee fee figure was verified on an OSB page at the time of writing. Fees, and what they cover, are questions to put to the trustee before signing, along with what happens to a payment if income changes and what happens if a payment is missed. The answers belong in the filed terms, not in a verbal assurance, because the creditors vote on the written proposal.
Step 3: File the proposal with the OSB
The trustee files the proposal with the OSB and sends the filing, with additional information, to all of the debtor's creditors. Filing is the moment the legal protection starts. The OSB states that once a bankruptcy or a proposal is filed under the Bankruptcy and Insolvency Act, a stay of proceedings takes effect, and creditors must stop trying to collect most debts. The stay stops most collection actions for unsecured debts included in the filing: collection calls, emails, and letters; wage garnishment; ongoing legal actions; and enforcement of court orders. It usually does not apply to secured debts, such as a mortgage or car loan, or to child or spousal support. A creditor that believes it is being unfairly harmed can ask the court to lift the stay. From filing onward, communication about the included debts goes through the trustee; the OSB directs debtors whose creditors keep contacting them to refer those creditors to the trustee.
Step 4: Creditors have 45 days
Creditors have 45 days from filing to respond. A first meeting of creditors is usually not held in a consumer proposal. The OSB position paper on the streamlined process states the rule plainly: if, at the expiry of 45 days following filing, no obligation has arisen to call a meeting of creditors, the proposal is deemed accepted by the creditors. An obligation to call a meeting arises if the Official Receiver directs one, or if creditors holding at least 25 percent of the value of proven claims request one within the 45-day period.
If a meeting is called, creditors vote. The Act's voting rule for a consumer proposal is an ordinary resolution, with creditors voting as one class, subject to the rights of secured creditors. A related creditor may vote against a proposal but not for it, and the administrator running the meeting cannot vote. If a meeting is called but there is no quorum, the proposal is also deemed accepted. Creditors that reject the terms can negotiate different terms with the trustee, and a revised proposal goes through the same creditor process. A rejected consumer proposal does not by itself put the debtor into bankruptcy; the debtor returns to the position before the proposal, and the stay ends.
Step 5: Court approval
After creditors accept the proposal, or it is deemed accepted, the proposal goes to court approval. In most cases no court application is needed: the trustee usually does not have to apply to court, because the proposal is deemed approved 15 days after it is deemed accepted by the creditors. Within that 15-day period, creditors can apply to the court for a review if they believe the terms are not fair or reasonable, the debtor committed an offence under the Act, or the debtor was not eligible to make a consumer proposal. The Official Receiver can also seek a review. If a review is sought, the court decides; if none is sought, the deemed approval stands and the proposal becomes binding.
Step 6: Pay, attend counselling, and complete the terms
Once approved, the debtor makes the payments set out in the proposal to the trustee, who distributes the money to creditors. The debtor stops paying the included creditors directly. Alongside the payments, the debtor must attend two financial counselling sessions. The OSB counselling directive sets the timing: the first session between 10 and 90 days after the filing of the consumer proposal, and the second at least 30 days after the first session and before the certificate of full performance is issued. By the end of both sessions, the trustee or insolvency counsellor must have presented information and consumer advice on budgeting, achieving financial goals, spending habits, and responsible use of credit, and must have assisted the debtor in developing a budget and at least three financial goals tailored to the debtor's needs.
When all the terms of the proposal are met, the debtor is legally released from the debts included in the proposal and receives a certificate of full performance. The trustee administers the file to that point, investigates the debtor's affairs, protects the rights of creditors, and ensures the debtor's rights are not abused, in the OSB's description of the trustee's responsibilities. If the debtor stops paying or does not attend the counselling sessions, the proposal can fail, and the protections and the release do not follow. What happens on a missed payment is set out in the filed terms and in the Act, and it is a question for the trustee at the time, not a matter this guide predicts.
What a proposal does not do
A consumer proposal deals with the debts included in it. Secured creditors keep their rights in the secured property, support obligations are not stopped by the stay, and some debts are not released even when a proposal is completed. The OSB's at-a-glance page states the release in general terms, with exceptions, and does not list every exception in that summary. The trustee identifies, debt by debt, what the proposal covers and what it does not, before filing. That identification is part of the Step 1 assessment, and it is the reason the inventory of debts in the proposal needs to be complete: a debt left out of the inventory is a debt the proposal may not deal with.
Related guides:
Starting a consumer proposal in Canada, in six steps
- Meet a Licensed Insolvency TrusteeOnly a Licensed Insolvency Trustee can file and administer a consumer proposal. The trustee reviews debts, assets, income, and expenses, and checks whether the eligibility limits in this guide are met.
- Build the offer with the trusteeThe trustee sets out a full inventory of income, expenses, assets, liabilities, and creditors, and drafts the offer: a percentage of what is owed, more time to pay, or both.
- File the proposal with the OSBThe proposal is filed with the Office of the Superintendent of Bankruptcy and sent to creditors. Filing starts the stay of proceedings for most unsecured debts included in the filing.
- Creditors have 45 daysCreditors have 45 days from filing. If no meeting of creditors is required in that period, the proposal is deemed accepted. A meeting can be requested by creditors holding at least 25 percent of proven claims.
- Court review window of 15 daysAfter acceptance, there is a 15-day period in which a review by the court can be sought. If no review is sought, the proposal is deemed approved.
- Pay, attend counselling, complete the termsPayments go to the trustee, who distributes them to creditors. The debtor attends two financial counselling sessions. When all terms are met, the debtor receives a certificate of full performance.
Questions people ask
Who can file a consumer proposal in Canada?
An individual who is insolvent and who owes less than $250,000, excluding mortgages, according to the Office of the Superintendent of Bankruptcy. The Bankruptcy and Insolvency Act wording the OSB relies on puts the limit at $250,000 not including a mortgage on the debtor's principal residence. A proposal is filed and administered by a Licensed Insolvency Trustee, who is licensed by the OSB. Companies do not use the consumer proposal route; the OSB describes commercial proposals separately, with no debt limit.
How does a consumer proposal start?
It starts with a Licensed Insolvency Trustee. The trustee takes a full inventory of income and expenses, assets and liabilities, and creditors, and sets that information out in the proposal with the offer of partial payment, extended time, or both. The proposal is then filed with the Office of the Superintendent of Bankruptcy, which supervises proposals under the Bankruptcy and Insolvency Act, and the filing and related information are sent to creditors. Only a trustee licensed by the OSB can do this work; a company that does not employ one cannot manage a consumer proposal.
How long can a consumer proposal run?
Performance must be completed within five years. That is the statutory ceiling in the Bankruptcy and Insolvency Act. Within that ceiling, the length and the amount paid are set out in the proposal itself, as filed. A proposal can be completed sooner if its terms are met sooner. This guide does not state a typical length, because the Act sets a maximum, not a standard term, and each filed proposal carries its own payment schedule.
What happens during the 45 days after filing?
Creditors review the proposal. A meeting of creditors is not usually held. If no obligation to call a meeting arises within 45 days of filing, the proposal is deemed accepted by the creditors. A meeting can arise if the Official Receiver directs one, or if creditors holding at least 25 percent of the value of proven claims request one within the 45-day period. If a meeting is held, creditors vote on the proposal as filed or as altered at the meeting. After acceptance, a court review can be sought within 15 days; otherwise the proposal is deemed approved.
Does filing stop creditors from contacting me?
Filing starts a stay of proceedings, a legal protection under the Bankruptcy and Insolvency Act. The OSB states that creditors must stop trying to collect most debts once a bankruptcy or proposal is filed, and that the stay stops most collection actions for unsecured debts included in the filing, including collection calls, wage garnishment, ongoing legal actions, and enforcement of court orders. The stay usually does not apply to secured debts such as a mortgage or car loan, or to child or spousal support. If a creditor keeps contacting the debtor while a stay is in place, the OSB directs the debtor to the trustee, and a complaint can be filed with the OSB.
What must the debtor do after a proposal is approved?
Three things run through the rest of the process. First, make the payments set out in the proposal to the trustee, who distributes the money to creditors, and stop paying the included creditors directly. Second, attend two financial counselling sessions: the first between 10 and 90 days after filing, and the second at least 30 days after the first and before the certificate of full performance is issued. The sessions cover budgeting, financial goals, spending habits, and responsible use of credit. Third, assist the trustee in administering the proposal. When all terms are met, the debtor is legally released from the debts included in the proposal and receives a certificate of full performance.
Sources
- Office of the Superintendent of Bankruptcy, Bankruptcy and Insolvency at a Glance — consumer proposal limit of less than $250,000 excluding mortgages, proposal as an offer to pay a percentage or extend time, release when all terms are met, debtor duty to attend two counselling sessions and assist the trustee, trustee licensing and duties, OSB supervision —
- Office of the Superintendent of Bankruptcy, Reasonable and Fair Provisions in Consumer Proposals — $250,000 limit excluding a mortgage on the principal residence, 45-day deemed acceptance, 15-day deemed court approval, streamlined process with usually no first meeting of creditors —
- Office of the Superintendent of Bankruptcy, Creditors contacting you after you file a bankruptcy or a proposal? — stay of proceedings, what it stops, exceptions for secured debts and support, referral of creditors to the trustee —
- Office of the Superintendent of Bankruptcy, Draft Directive No. 1R5, Counselling in Insolvency Matters — two counselling sessions, first between 10 and 90 days after filing, second at least 30 days after the first and before the certificate of full performance, session content —
- Financial Consumer Agency of Canada, Consumer Alert — What you need to know when getting help to pay off debt or repair your credit — only a Licensed Insolvency Trustee can help with a consumer proposal or bankruptcy, trustee advice typically free, illegal for a company without a trustee to claim it can manage a proposal —
Where a figure could not be verified on an Office of the Superintendent of Bankruptcy or Financial Consumer Agency of Canada page at the time of writing — trustee fees, a typical proposal term within the five-year ceiling, and how long a proposal notation remains on a credit report — this guide states no figure and points to the trustee meeting and the filed terms instead. Check those sources before signing anything or planning around a date or a cost.