Update: 10/02/2018

Getting a mortgage if you are in a consumer proposal is possible. In most cases because you will not qualify for the best rate but there are options. This could range from a lower loan to value to a second mortgage. What is a consumer proposal?

What is a Consumer Proposal?

consumer proposal

A consumer proposal is a legal agreement (and an alternative to a bankruptcy) between a debtor and his or her creditors when the debtor cannot afford to pay the creditors. In this process, the bankruptcy trustee will work with you to develop a “proposal”—an offer to pay creditors a percentage of what is owed to them, or extend the time you have to pay off the debts, or both.

The Bankruptcy and Insolvency Act (BIA) requires that the terms of a consumer proposal be completed within five years. A proposal is defined in the BIA as a proposal or consumer proposal for a composition, an extension of time, or a scheme or arrangement by which a person, unable to discharge his or her financial obligations in the ordinary course, may make an offer to creditors to settle these obligations. Once the proposal is accepted, deemed or otherwise, by the creditors and the court, it is, in effect, a binding contact on both the debtor and the creditors.

Something to know:

The administrator, who is a licensed bankruptcy trustee, makes a binding offer to your creditors to settle debts Creditors often agree to accept a significant discounted amount The amount you pay depends on the amount you earn and how much property you own

A consumer proposals also:

  • Avoids you going personal bankruptcy.
  • Avoids your creditors taking legal action against you.
  • Ensures that you do not lose your assets e.g. your home or car.
  • Reduces the amount of money that you have to pay.
  • Allows you to make monthly payments that you can afford.
  • Allow you get to keep your assets
  • To qualify to make a consumer proposal, someone must:
  • Be insolvent – have more debts than assets, or are unable to meet your obligations as they come due.
  • Owe less than $250,000 to your creditors, excluding a mortgage on your home.
  • Have enough income to make a monthly payment or access to funds to be used as a lump sum payment.

A consumer proposal can be made by a consumer debtor unless the consumer debtor has already filed a notice of intention to make a proposal or has filed a proposal under division I of part III of the BIA and the trustee has not been discharged. A consumer debtor is defined as a natural person who is bankrupt or insolvent and whose aggregate debts, excluding any debt secured by the debtor’s principal residence, do not exceed $250,000.00.


Why would someone consider a Consumer Proposal?

The main reason people enter into a consumer proposal is to get their debts consolidated and finances back under control.

Reduces your personal and finance stress. A consumer proposal will have a less severe impact on your credit.

One enters into a consumer proposal when you owe more money than you can make payments for.

The debtor might avoid the stigma and practical consequences of bankruptcy (but not always, as usually their credit rating will be affected and the connotation of financial failure may still be present); • the debtor may be able to preserve assets and their equity in a car or house; and, • creditors may obtain a larger distribution than in a bankruptcy, although it may be over a longer period of time.

How can I get a mortgage when I am in a consumer proposal?

You can apply for a mortgage, renew or refinance your current mortgage during your consumer proposal. However, because you are in a consumer proposal it fewer lenders will be interested in giving you a mortgage.

You will need the services of an experienced and mortgage agent to find you a mortgage and you might need a first and second mortgage or a private mortgage to access the equity you need from your property.

If you are a current homeowner and are in or are thinking about a proposal there are a few things you should consider. Renewing your mortgage or refinancing your mortgage might not be as easy and the rates might not be the most attractive for several years. Depending on your reestablished credit or the length of time you take to pay off the proposal could seriously affect your credit rating.


Paying out your proposal in a lump sum is always the way to go. It allows you to start establishing your credit faster as it reflect the payment three months after you have paid out the proposal.

If you make monthly payments and take six years then it would take 9 years to reflect and allow your credit rebuilding process to start. In some cases you will need to restructure the entire mortgage to pay out the proposal so you can reset your mortgage payment and give you enough time for the consumer proposal to fall off your credit bureau before you reapply for a new mortgage.

2 Replies to “Getting a mortgage after a consumer proposal”

    1. Hello Ray,

      Buying a house in a consumer will depend on your income, how much is going to debt, how much you are looking to put down and what your qualification ratio will look like. This is taking all your income and putting it against your monthly mortgage payments, property taxes and proposal payment and any other loans of credit card monthly payment you may have.

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