What’s the Consumer Proposal Debt Limit?

A debtor can file a consumer proposal only if his/her total debts, excluding the mortgage(s) on the principal residence, do not exceed the consumer proposal debt limit.

Effective September 18, 2009, the consumer proposal debt limit is $250,000. A husband and wife filing a joint proposal would have a combined limit of $500,000.

How can I make sense of all this?

Those statements appear straightforward, but you would be surprised at how often they cause confusion and concern.

When you are considering whether to file a consumer proposal, we suggest you make a list of all the debts you owe: your mortgage, car payments, income taxes, lines of credit, loans, credit cards, etc, etc, etc. When you have completed the list, circle or otherwise highlight the mortgage(s) on you home, to be excluded from the sum. If you own more than one home (or a home and a cottage) only the mortgages on your principal residence may be excluded. Add up the items remaining on the list.

If the total of your list exceeds $250,000, then you are not eligible to file a consumer proposal.

To add to the confusion, if two people are filing together, the rule is slightly different. They should make a single list of all their debts, and then exclude the mortgage(s) on their home in the same way. The limit on this single total is $500,000. That is, if the total of their debt is more than $500,000, then they may not file a consumer proposal.

What if I am outside the limit?

If your debts are higher than the limits, you cannot file a consumer proposal, but you still can file a Proposal to Creditors under Division 1 of the Bankruptcy & Insolvency Act. The rules are somewhat more complicated, but a proposal is still possible.

What should I do?

As the rules surrounding consumer proposal are complex, we suggest that you consult a Licensed Insolvency Trustee and ask him/her to review your situation and determine if a consumer proposal is the correct option for you.