What are my options for debt forgiveness?

If you’re seeking to become debt-free, you may be considering two potential options: filing for Bankruptcy or entering into a Consumer Proposal. As you explore the benefits and implications of these options and how they might impact your financial future, you may also be grappling with important questions, such as “What will happen to my house and car?”, “Will I lose all of my assets and valuable possessions?”, and “what am I allowed to keep?”.

In this article, we will answer these questions in detail so that you can make a confident decision about which debt relief option works for you.

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Consumer Proposal

A Consumer Proposal allows you to make interest-free payments to your creditors for up to five years. In certain circumstances, the amount paid within the Proposal can be significantly less than the total amount of debt you owe. To take advantage of this option, you’ll work with a Licensed Insolvency Trustee (LIT) to create a proposal that outlines the amount and duration of your repayment plan. Once your proposal is complete, it becomes legally binding if a majority of your creditors vote in favour of it or accept it.

One of the key benefits of a Consumer Proposal is its flexibility, which allows you to retain your assets such as a new car, property, or savings and investment account. However, it’s important to understand how each of your assets will be impacted before deciding to move forward with a Consumer Proposal.

Can you keep your home?

If you're considering filing a Consumer Proposal, you might be wondering whether you'll be able to keep your home. The good news is that, in most cases, you won't have to give up your home as long as you can continue to make your monthly mortgage payments as usual and keep up with the agreed-upon Consumer Proposal payments.

It's important to note that a mortgage is a type of secured debt, which means that it's typically not affected by a Consumer Proposal. This means that your mortgage lender will continue to have a claim on your home, but as long as you can keep up with your payments, you should be able to keep your home.

Can you keep your car?

In most cases, you can keep your car as long as you can continue making your auto financing and Consumer Proposal payments. Similar to your mortgage, your car loan is a type of secured debt, so it's not impacted by the Consumer Proposal. However, if you miss payments, your lender may repossess your vehicle. If you're struggling to keep up with your car payments, you can also choose to return the car to the secured creditor. In this instance, your Consumer Proposal would encompass any amount left owing after the secured creditor sells the car.

Keep in mind that many cars depreciate in value faster than you'll be able to pay off your loan. This means that you may still owe more on your car than you'd get if you were to sell it. So, while you can keep your car with a Consumer Proposal, it's important to carefully consider whether it's worth it financially in the long run.

Will your RRSPs, investments, tax returns, and government benefits be affected?

One of the advantages of a Consumer Proposal is that it allows you to keep your investments and savings. The value of your RRSPs, RESPs, and other investments will be protected. You’ll also be able to continue filing your annual income tax returns and receiving government benefits such as the GST rebate, Child Tax Benefit, Canada Pension Plan, and more, that you’re entitled to while you’re in the Consumer Proposal.


Bankruptcy is a legal process that can help you get rid of your unsecured debt. During this process, some of your assets are assigned to a Licensed Insolvency Trustee (LIT) who files the bankruptcy, handles the paperwork, and guides you through the process.

The good news is that, depending on the legislation applicable in the province where you live, you may be able to keep some of your assets such as your personal and household items. These assets are excluded from those that would be sold by your LIT to pay off your creditors, allowing you to hold on to some of your possessions as you make your way to a fresh financial start.

Curious about what assets you can keep in a Bankruptcy in your province?
The assets you’re entitled to keep when you file for Bankruptcy are dependent on the province you live in. Here’s everything you need to know.
Read More 

Can you keep your car?

You may be able to keep your car, depending on your lease or financing agreement. Your LIT will calculate the equity in the car by subtracting the balance due on the payments from its value.

If the equity is negative, you can keep the car. But if it's positive, you'll need to pay the LIT the equity amount to keep it. For example, if your car has $1,000 in positive equity, you could pay your LIT that amount to keep your car. However, if your vehicle doesn’t have a lease or financing agreement, your LIT will determine if the value of your car is over the exemption limit allowed in your province.

Can you keep your home?

You won’t lose your home when you’ve filed a Bankruptcy as long as you can keep up with your mortgage payments and your equity falls within the exemption limits in your province. Your LIT will calculate the equity by subtracting the sale costs, outstanding property taxes, and real estate commissions from the home's value. If the remaining equity is less than the allowable exemption limits when you file for bankruptcy, you can keep your home.

Get a Free Confidential Consultation from your local MNP Trustee. They’ll conduct a thorough review of your financial situation and discuss available options with you, including those outside of a Consumer Proposal or Bankruptcy, and their implications on your assets.

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