The structure is the first difference
An informal settlement is an agreement with a creditor. It may cover one account without changing the others. A consumer proposal is filed through a Licensed Insolvency Trustee and follows a federal process. The trustee submits an offer to unsecured creditors based on your financial situation.
The Office of the Superintendent of Bankruptcy says a consumer proposal can run for no more than five years. It is generally available when debts do not exceed $250,000, excluding a mortgage on your principal residence. Those thresholds do not determine whether the option is suitable; a trustee must assess the details.
One creditor agreement is not the same as a proposal vote
In an informal settlement, each creditor decides whether to accept its offer. A deal with one does not force another to participate. In a consumer proposal, creditors have 45 days after filing to accept or reject the proposal or request a meeting. Voting rules then determine whether the proposal is accepted by the affected unsecured creditors.
Do not interpret this as automatic approval. Before relying on either path, ask who must agree, which debts are outside the arrangement and what happens if acceptance does not occur.
| Question | Informal settlement | Consumer proposal |
|---|---|---|
| Who administers it? | You, a representative or settlement company | Licensed Insolvency Trustee |
| How is it accepted? | Each creditor decides on its offer | Federal creditor-voting process |
| Maximum term | Depends on each agreement | Up to five years |
| Legal stay of proceedings | Not created just by making an offer | Generally begins when the proposal is filed |
Ask precisely what protection starts—and when
A consumer proposal generally creates a stay of proceedings for included unsecured debts after filing, subject to legal limits and exceptions. An informal settlement request does not, by itself, stop interest, calls, lawsuits or collection. A settlement company cannot grant legal protection.
Secured debts and support obligations need separate attention. If a home, vehicle, wage, bank account or court deadline is involved, ask the relevant licensed professional how the rules apply to the actual documents.
Compare total payments, not the advertised percentage
Suppose an advertisement says a balance could be “cut by half.” That does not tell you which creditors would accept, how long funds would accumulate, what fees apply or how missed payments affect the result. For a proposal, ask the trustee for the required payment schedule, duties and consequences of default. For a settlement, ask for the fee and payment schedule for every creditor.
Make one table using the same columns for both: total amount paid, all service fees, expected completion date, debts included, required conduct, credit reporting and failure scenario. The comparison should leave blanks where an outcome is not guaranteed.
Prepare for a conversation
- Complete unsecured and secured debt list
- Written fees and payment schedule for each option
- Debts that would remain outside the arrangement
- Consequences if a payment or settlement fails
You do not need account numbers, a SIN, banking credentials or uploaded documents to start our enquiry.
Is debt settlement just another name for a consumer proposal?
No. A consumer proposal is a formal insolvency process administered by a Licensed Insolvency Trustee. An informal settlement is a negotiated agreement and does not create the same process or protections.
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