What is a Business Consumer Proposal?
A Consumer Proposal is a formal, legally binding process under the Bankruptcy and Insolvency Act (BIA) in Canada. It allows individuals or businesses to settle their unsecured debts with creditors by offering to pay a portion of the amount owed through a Licensed Insolvency Trustee (LIT).
Who qualifies to file a Business Consumer Proposal?
Any business incorporated with debts can file.
How is a Consumer Proposal different from bankruptcy?
In bankruptcy, you surrender certain assets and your credit is impacted more severely. A Consumer Proposal allows you to retain assets, avoid bankruptcy, and repay part of your debt over time.
Do I need to close my business to file a proposal?
Not necessarily. Many business owners continue to operate while repaying debts under a proposal, especially if their debts are primarily personal or tax-related.
Can I keep my assets while in a proposal?
Yes. Unlike bankruptcy, a Consumer Proposal allows you to retain your personal and business assets, as long as you keep up with agreed payments.
Does a Consumer Proposal cover CRA tax debt?
Yes. Most CRA debts, including income tax, GST/HST, and payroll remittances, can be included in a proposal.
Will CRA penalties and interest stop once I file?
Yes. Filing a Consumer Proposal puts an immediate stay of proceedings, which stops penalties, interest, and collection actions.
Can CRA still freeze my bank account or garnish wages after filing?
No. Once the proposal is filed and accepted by the court, CRA and other creditors must cease all enforcement actions.
What kind of payment terms should I expect?
Most proposals last 3–5 years, with fixed monthly payments based on your income, assets, and what creditors agree to.
How is the monthly payment amount determined?
It’s based on what you can reasonably afford and what creditors would receive if you filed for business consumer proposal
What happens if I miss a payment?
If you miss three payments, the proposal is annulled, and creditors can resume collection activity.
Can creditors reject my proposal?
Yes, creditors can vote against it. However, most proposals are accepted because creditors usually receive more than they would in bankruptcy.
What happens if creditors vote against my proposal?
Your Licensed Insolvency Trustee can renegotiate terms to reach a compromise, or bankruptcy may be considered as an alternative.
Can I continue running my business while in a proposal?
Yes. Most sole proprietors and small business owners continue operations during the proposal.
What happens when I finish paying the proposal?
Once complete, you are legally released from all debts included in the proposal, and creditors cannot pursue you further.