Life After Debt Relief: What Really Happens After Filing a Consumer Proposal?

Filing a consumer proposal can feel like a turning point—the beginning of a new chapter where debt no longer dictates your decisions. But what actually happens once the proposal is filed? The paperwork may be done, but the journey isn’t over. In fact, it’s just beginning.

If you’ve recently filed, or are considering a consumer proposal in Toronto, understanding the road ahead is just as important as knowing how to get started. Here's what life looks like after your proposal is officially in motion.

Your Creditors Must Stop Contacting You

Once your proposal is accepted by the Licensed Insolvency Trustee (LIT) and filed with the Office of the Superintendent of Bankruptcy (OSB), it triggers an automatic stay of proceedings. This legally binds your creditors to stop calling, emailing, or initiating any new collection efforts. No more court actions. No more wage garnishments. The relief is immediate and enforceable.

It’s worth noting, however, that any secured debts—such as your mortgage or auto loan—aren’t included in the stay. Those payments must continue as usual.

The 45-Day Creditor Review Period

After the proposal is filed, creditors are given 45 days to review and vote on its terms. This period can feel long, especially when you're eager to move forward, but it’s critical to the process. If the majority of creditors (by dollar value of the debt) accept the terms, your proposal is legally binding on all of them—even those who voted against it or didn’t respond.

If no meeting of creditors is requested during this time, the proposal is deemed accepted. Most proposals are approved without issue, but it's still a good time to mentally prepare for your next steps.

Monthly Payments Begin (and Must Be Maintained)

Your repayment schedule kicks off right after the proposal is accepted. These fixed, interest-free monthly payments go directly to your LIT, who then distributes the money to your creditors. The amount you pay was calculated based on your income, expenses, and what your creditors are likely to accept.

Miss more than two payments, and your proposal can be annulled—putting you back in the same stressful position you were trying to escape. Setting up automatic withdrawals is one of the best ways to stay on track.

Your Credit Score Takes a Hit—But It’s Not Permanent

Filing a proposal will significantly affect your credit score. In most cases, you’ll be assigned an R7 rating (indicating you’re making payments through a special arrangement). This rating remains on your credit report for three years after you complete your proposal or six years from the filing date—whichever comes first.

Although it sounds daunting, this isn’t a financial death sentence. Many individuals begin rebuilding their credit within a year of filing by using secured credit cards and maintaining consistent bill payments.

You’ll Complete Two Mandatory Financial Counselling Sessions

Part of the legal requirement of a consumer proposal includes attending two financial counselling sessions. These sessions are not punitive; rather, they’re an opportunity to develop stronger money management habits. Topics often include budgeting, understanding credit use, and setting realistic financial goals.

These sessions are typically held one-on-one and are designed to support—not judge—you. Attending both sessions is mandatory to complete your proposal, and skipping them can jeopardize your progress.

You Are Protected from Interest Accumulation

One of the most empowering features of a consumer proposal is the freeze on interest. Once filed, the total debt included in the proposal stops accumulating interest, which means your monthly payments go toward reducing principal—nothing more.

This stands in sharp contrast to debt consolidation loans, which often come with high interest rates and longer repayment periods. Your proposal is designed to give you clarity and predictability.

Your Assets Are Protected

Unlike bankruptcy, where you may be required to surrender non-exempt assets, consumer proposals allow you to retain ownership of your home, car, RRSPs, and other valuables—so long as you stay current on secured payments.

This approach allows you to stabilize your finances without the emotional toll of losing your assets. It’s a key reason why many Canadians choose this option when eligible.

Rebuilding Trust with Creditors and Institutions

You won’t regain full access to traditional credit right away, but many financial institutions offer secured credit products to help you rebuild your financial profile. A secured credit card, for instance, requires a deposit and comes with a modest limit, but it reports to credit bureaus—allowing you to prove your reliability over time.

Paying your utility bills on time, avoiding new debt, and keeping a low credit utilization ratio all contribute to this process. It’s slow, but it’s steady—and it works.

Emotional Relief (and New Responsibility)

There’s an emotional shift that often happens once the pressure of collection calls and unmanageable payments disappears. Relief. Optimism. A return to focus on work, family, and personal goals. But this newfound breathing room comes with responsibility.

The habits that led to unmanageable debt—whether circumstantial or behavioural—must be addressed. The proposal gives you the structure to change, but staying on track is still up to you.

You’ll Receive a Certificate of Full Performance

Once you’ve completed your payment obligations and attended both counselling sessions, your trustee will issue a Certificate of Full Performance. This document confirms that you've fulfilled your legal duties under the proposal.

Keep this certificate safe—it’s your proof that the debt was resolved and that you honoured the terms. It also plays an important role in updating your credit file and providing peace of mind that you’ve closed this chapter cleanly.

A Fresh Start, If You Stay the Course

A consumer proposal is more than just a debt solution—it’s a second chance. It allows you to hit pause on the chaos and reset your financial life with structure and dignity. But the success of the process hinges on follow-through. Payment discipline, ongoing education, and smart credit habits are the pillars of life after filing.

For those who commit to the process, that fresh financial start becomes more than a possibility—it becomes a lived reality.