Consumer Proposals and Your Credit in Canada: What Happens to Each Account

By the FixMyCredit.ca editorial team · Published June 8, 2026 · Last updated October 10, 2026

A consumer proposal is a legally binding agreement, filed through a Licensed Insolvency Trustee under the federal Bankruptcy and Insolvency Act, to repay part of what you owe on unsecured debt over up to five years. Interest stops, collection calls and wage garnishments stop, and every account in the consumer proposal is marked R7 on your credit report until the proposal ages off. FixMyCredit.ca is a free referral service, not a lender or a trustee: we connect you with a partner who can explain what a consumer proposal would do to your credit before you decide.

What is a consumer proposal?

A consumer proposal is an offer to your unsecured creditors to pay back a portion of what you owe, in fixed payments over no more than five years, in exchange for the rest being released. Only a Licensed Insolvency Trustee can file one, and the law caps it at $250,000 of total debt, not counting the mortgage on your home.

Once creditors accept, the deal binds all of them, including the ones who voted no. Interest on the included debts stops the day you file. Your trustee collects the payments and sends them on to the creditors, so you deal with one office and one amount.

A proposal sits between the lighter routes and bankruptcy. It is heavier on your credit than a debt management plan because you repay less than you owe. It is lighter than bankruptcy because you keep your assets and the mark on your report is shorter. That trade, and what it does to each line on your credit report, is what this page is about.

What does a consumer proposal do to your credit?

A consumer proposal puts two kinds of marks on your credit report: an R7 rating on every account included in the proposal, and a public record entry for the proposal itself. Both bureaus in Canada, Equifax and TransUnion, record it.

In the rating codes lenders read, R7 is the code for accounts being paid through a special arrangement such as a consumer proposal. It sits two steps above the R9 that bankruptcy and written off collections carry. Lenders read it as a borrower who owed more than they could pay but chose a repayment deal.

What changes on the day you file is smaller than most people expect. If you are weighing one, your file already shows late payments, maxed out cards or collections. The proposal stops new damage: no more 30, 60 and 90 day late marks, no new collection accounts, and no judgments on the included debts.

When does a consumer proposal come off your credit report?

Equifax and TransUnion remove a consumer proposal 3 years after you finish paying it or 6 years after you file it, whichever date comes first, according to the Financial Consumer Agency of Canada. TransUnion’s own help pages count the six years from the date your accounts went into default, which can bring its date a little earlier, so check both reports.

That rule has a consequence few guides spell out: paying early only moves your date if you finish inside three years. Here is the same filing date worked three ways.

Someone who stretches the proposal to the full five years and someone who clears it in three see the record leave in the same month. Clearing it in two years moves the date a full year earlier. If a lump sum from a tax refund or a family member could close the proposal inside three years, that is when it pays off on your credit.

The individual R7 accounts keep their own history, which generally drops off six years after the date of last activity on that account. Our guide to how long bad credit stays on your report lists every item, from late payments to a second bankruptcy.

What happens to each of your accounts in a consumer proposal?

Every unsecured debt you owe goes into the proposal, and secured debts stay outside it on their normal terms. You do not get to leave out one credit card to keep it open. Here is what happens account by account.

The overdraft row catches people every year. A bank that is also your creditor has a right of set-off: on the morning you file, it can take what is in your chequing account to reduce what you owe it. Move your pay deposit to a bank you do not owe money to before the filing date, and your trustee will tell you the right timing.

For the loans you might need while the proposal runs, such as a car, a secured card or a mortgage renewal, see our guide to borrowing during a consumer proposal.

Will a consumer proposal pay off your debt?

Yes. When a consumer proposal is completed, the unsecured debts in it are released for good, even though you paid back only part of them. The creditors cannot come back for the rest.

Here is one household’s numbers, worked through the way a trustee would look at them. This is an illustration of how the math works, not an offer; your trustee sets the real figure from your income, your assets and what creditors would receive in a bankruptcy.

Before filing, the minimum payments on those balances ran about $1,150 a month, and most of that went to interest. In this example the trustee’s offer is $15,000 over 60 months, which is $250 a month with nothing added on top. The other $23,000 is released when the last payment clears.

Three things decide where your own number lands. Creditors must get at least what a bankruptcy would pay them. Surplus income matters: the more you earn above the federal living standard for your household size, the more a bankruptcy would take, so the more a consumer proposal must offer. Assets matter too: equity in a house or a paid off car raises the offer, because creditors could reach it in a bankruptcy.

What happens to a co-signer or a joint debt?

A consumer proposal releases only the person who filed it. A co-signer, a guarantor or a joint borrower still owes the full balance, and the creditor can turn to them for it the day you file.

The Bankruptcy and Insolvency Act says a creditor’s acceptance of a consumer proposal does not release anyone who was jointly bound with you or who stood as your guarantor. If your sister co-signed your line of credit, the bank can ask her for the whole amount. Talk to anyone who signed with you before you file, not after.

Couples with the same debts can file one joint consumer proposal. The Act lets two proposals be handled as one where the people’s finances are tied together, and the federal directive allows it when both people’s debts are substantially the same. One trustee, one set of fees and one payment cover both people, and each person’s credit report shows the R7 marks.

A joint bank account is a separate question. If the account holds no debt, it stays open. If it carries an overdraft with a bank you owe, the set-off rule in the table above applies to money in it, including your partner’s pay.

How does a consumer proposal work, step by step?

A consumer proposal runs through six steps with fixed legal deadlines, and most proposals are accepted and approved about 60 days after filing.

1. Free trustee consultation: the trustee reviews your debts, income and assets, checks whether a lighter option would work, and models what creditors would accept.
2. Filing: the trustee files the proposal with the Office of the Superintendent of Bankruptcy. A stay of proceedings starts at once: collection calls, lawsuits and wage garnishments on the included debts stop.
3. Creditor review: creditors have 45 days. A meeting is called only if creditors holding at least a quarter of the debt ask for one. If no meeting is requested, the consumer proposal is deemed accepted.
4. Court approval: after acceptance, the Official Receiver or any interested party has 15 days to ask for a court review. If nobody does, the court is deemed to have approved it, so most people never see a courtroom.
5. Counselling: you attend two financial counselling sessions. The trustee cannot issue your completion certificate if you skip them.
6. Payments and completion: you pay the trustee monthly for up to 60 months. You can pay it off early at any time with no penalty. When the last payment clears, the trustee issues a certificate of full performance.

Your credit report updates at step 2. The rest of the process happens between the trustee and your creditors, and your job is to make each payment on time.

What does a consumer proposal cost?

It costs you the amount of the offer and nothing on top. The trustee’s fees are set by federal rules under the Bankruptcy and Insolvency Act and are paid out of the money you send in, so there is no separate bill and no upfront retainer.

Rule 129 of the Bankruptcy and Insolvency General Rules sets the trustee’s fee in three parts: a fixed amount when the proposal is filed, a fixed amount when it is approved, and a share of the money paid out to creditors. Counselling and filing costs are covered the same way. Your trustee has to show you the whole schedule before you sign.

The cost to watch for is the one before the trustee. Some unlicensed “debt consultants” charge a fee to prepare you for one and then refer you to a trustee you could have called yourself for free. Only a Licensed Insolvency Trustee can file one, as the Office of the Superintendent of Bankruptcy explains on its consumer proposal page.

What if you miss payments or your income changes?

If you pay monthly, a consumer proposal is annulled automatically once you are behind by an amount equal to three payments. If you pay less often, it is annulled three months after a payment is missed. When that happens, the stay ends and your creditors can go back to collecting what you owed them, less what they were paid.

An annulled proposal can sometimes be brought back. Within 30 days of the annulment, your trustee can send creditors a notice that it will revive automatically 60 days after the annulment unless a creditor objects. A trustee can also ask a court to revive it.

If your income drops for good, you do not have to wait for a default. Your trustee can file an amended proposal at any point before it is fully paid, for example a lower payment over a longer term, still inside the five-year limit. Creditors review the amendment the way they reviewed the original.

A second consumer proposal is possible, with limits. After an annulled proposal, the law bars a new one until the creditors in the old one are paid in full, unless a court orders otherwise. After a proposal you completed, nothing in the Act stops another one. And two cannot run at once: a new proposal needs court approval, which ends the old one.

Consumer proposal vs bankruptcy, a DMP and consolidation

A consumer proposal is the only option that both reduces what you owe and binds every creditor by law while leaving your assets alone. The trade is a heavier credit mark than the full-repayment options.

Bankruptcy is faster and usually cheaper, but a first bankruptcy stays on your report longer and you may have to give up assets or pay surplus income. The consumer proposal vs bankruptcy section below runs both through the same credit file. If you can still repay the full amount, a lighter route wins; our overview of debt relief and your credit maps all of them.

Consumer proposal vs bankruptcy: what each one does to your credit

A consumer proposal marks each included account R7 and leaves your report about three years after your last payment, while a first bankruptcy marks them R9 and stays six to seven years after discharge, so the credit gap between the two is real but smaller than the advertising suggests. The larger differences are what you keep, what you pay each month and how long each one takes to clear.

Many lenders read a completed proposal more kindly than a bankruptcy because it shows you repaid something; others treat R7 and R9 the same. Mortgage lenders mostly care about how long it has been since completion and what you have rebuilt since.

Which one clears faster?

• A first bankruptcy with no surplus income: discharged in about nine months, R9 gone six to seven years later. Total shadow about seven to eight years, with rebuilding possible from month ten.
• A proposal paid over the full five years: R7 gone about three years after completion. Total shadow up to eight years, but you keep your assets and can rebuild while you pay.
• A proposal paid off early: completion moves up, the three-year clock starts sooner, and total visibility can drop to four or five years. That is the fastest clean exit for larger debts, which is why a proposal you can accelerate usually wins the comparison.

A worked example

Take a single filer with $40,000 of unsecured debt, take-home pay of $4,200 a month, a financed car worth less than its loan and $15,000 of equity in a condo. The trustee models a proposal around $16,000, about $267 a month for 60 months, fixed whatever happens to income; the condo equity and the car are untouched, and paying it off in three years instead of five moves the R7 purge date up by two years.

In bankruptcy the same income sits well above the federal surplus-income threshold, so roughly half the excess, about $700 a month for 21 months (around $14,700), goes to the estate, plus whatever the condo equity exceeds the provincial exemption. The “drastic” option costs nearly as much cash, takes the asset and reports longer. Flip the inputs to a low income, no assets and $25,000 owing, and a short bankruptcy becomes the obvious arithmetic. Your numbers decide, which is what the free consultation with a Licensed Insolvency Trustee is for.

Consumer proposal myths that stop people from asking

• “I will lose my house.” No. Keeping assets is the main reason people choose a proposal over bankruptcy. Home equity can raise the offer, but you keep the house.
• “It is the same as bankruptcy.” It is not. A proposal is a settlement rated R7; bankruptcy is rated R9 and stays on file longer.
• “My employer will find out.” Only if a garnishment was already running, and filing stops it. Anyone can search the federal insolvency records for an $8 fee, but in practice lenders see the proposal on your credit report, not in the registry.
• “My credit is ruined for good.” The record has a fixed end date, and new accounts you open after filing report normally from the first payment.
• “I should empty my RRSP to pay the cards first.” Usually a mistake. RRSPs are largely protected in an insolvency, apart from contributions made in the last 12 months, so cashing one out can mean paying tax to hand money to creditors who would never have reached it.

How to rebuild credit during and after a consumer proposal

Rebuilding starts the month you file, not the month it ends. Lenders look at what you did after the R7 as much as the R7 itself.

1. Make every proposal payment on time. The trustee reports completion, and a clean payment run is what the next lender asks about.
2. Open one secured credit card. Use it for one small bill a month and pay the statement in full. Our guide to credit cards to rebuild credit shows how a new card appears on each bureau report.
3. Keep the balance low. Aim to report under 30% of the limit each month, so a $500 limit reports under $150.
4. Check both reports twice. Once about 60 days after filing, to confirm every included account shows the proposal, and once after completion, to confirm the record shows it paid. Both bureaus give you your report free; Equifax explains how long each item stays on its report.
5. Fix what is wrong. An included account still showing a balance or new late payments after filing is an error you can dispute; see how to remove late payments from your credit report.

People who follow those five steps often qualify for mainstream credit within a year or two of completion. After a bankruptcy the same steps apply, and our guide to rebuilding credit after bankruptcy covers the longer clock.

How FixMyCredit.ca can help with a consumer proposal

FixMyCredit.ca connects you with a partner who reviews your credit file and your debts and tells you whether a consumer proposal, a lighter route or credit repair on its own fits your situation. We do not file proposals, lend money or act as a trustee, and the referral costs you nothing.

The free assessment takes a few minutes: your debts, your income and what you want to protect. A partner then contacts you to go through the options. If a consumer proposal is the right answer, you still file it with a Licensed Insolvency Trustee of your choice. For independent help, the Financial Consumer Agency of Canada publishes free guides on dealing with debt.

Consumer proposal FAQ