How does a consumer proposal affect a creditor's ability to sue me in Ontario?

A consumer proposal is a formal insolvency option under federal law — the Bankruptcy and Insolvency Act — administered by a Licensed Insolvency Trustee (LIT). When you file a consumer proposal, an automatic stay of proceedings takes effect immediately. This stay prevents most unsecured creditors from starting or continuing lawsuits, wage garnishments, or other enforcement actions against you for debts included in the proposal.

The stay is a powerful protection. A creditor who had already obtained a judgment and begun garnishing wages must stop once the stay is in place, subject to certain procedural steps. Secured creditors — such as mortgage holders — are not bound by the stay in the same way and can still enforce their security interest.

The proposal itself is a repayment plan: you offer to pay creditors a portion of what you owe, typically over a period of up to five years. If the required majority of creditors (by dollar value) vote to accept, all unsecured creditors are bound by it, even those who voted against. Successfully completing the proposal discharges the remaining included debts.

Consumer proposals are administered federally and deal only with existing debts — they do not help with debts incurred after the filing date. If you are facing lawsuits from multiple creditors, a consumer proposal or bankruptcy may provide more comprehensive relief than defending each claim individually. Consult a Licensed Insolvency Trustee and a lawyer to evaluate your options.