Which Debts Can a Consumer Proposal Include?

Two different questions: included and released

A debt may need to be disclosed even when it will not be released through ordinary proposal terms. That distinction matters: leaving a difficult debt off your list does not make it disappear. Start with every creditor, then have a Licensed Insolvency Trustee explain the treatment of each claim.

Under section 66.28 of the Bankruptcy and Insolvency Act, an approved consumer proposal generally binds unsecured claims and certain secured claims proved under the Act. Specific debts have an additional release restriction. The rule is more precise than saying that every debt is wiped out after a fixed number of payments.

A practical sorting table

This is a preparation checklist, not a ruling that a particular debt qualifies. A lender's brand name alone does not tell you whether its claim is secured or whether a legal exception applies.

Secured debts need a separate conversation

A secured creditor has rights against specific property. A proposal's protection for unsecured debts usually does not stop mortgage or car-loan enforcement, and support claims also have important exceptions. The OSB explains these limits in its guide to creditors contacting you after filing.

Bring the financing contract and any arrears notice. Ask which payments must continue, what happens if you keep or surrender the asset, and whether a shortfall may remain. Do not assume an unsecured-debt estimate includes the cost of keeping your home or vehicle.

Student loans and other release exceptions

Section 178 identifies debts with special treatment, including support obligations, certain court fines and awards, some fraud-related debts, and qualifying government student and apprentice loans within the applicable seven-year period. The student-loan timing depends on when you ceased to be a student under the relevant law. It is not simply seven years since the loan was first issued.

Ask an LIT to check your study record, particularly if you returned to school. Private borrowing used for education should also be identified separately rather than assumed to follow government-loan rules.

Tax balances and joint debts are not all alike

Tax debts can require a close look at the type of claim and any security or priority. Bring notices and correspondence so the trustee can check the actual position. CRA's proposal information confirms that proposals are distinct from bankruptcy; it is not a promise that every government balance will receive identical treatment.

Your proposal also does not automatically release a co-borrower or guarantor. Section 66.28(3) preserves the obligations of other people who would not be released under the Act. Ask what collection risk remains for each person before assuming the household's entire exposure has been resolved.

Make a one-page debt inventory

Use one row per account. Write the creditor's name, approximate balance, account type, required payment and any missed payments. Add a column for security, another for other signers, and a final column for questions. Mark unknown information as unknown instead of guessing.

Keep the statements available for a private discussion with the professional you choose. You do not need to upload account numbers, a SIN or bank documents to ConsumerProposal.ca to read our guides. Our LIT guide explains how to verify a licence and prepare for a meeting.