If my friend filed a consumer proposal, will I get all my money back?

Almost never in full. A consumer proposal replaces the full debt with a reduced amount the debtor pays over up to five years, and creditors forgive the rest. As an unsecured creditor you typically receive a portion of what you're owed — more than you'd get in a bankruptcy, but well short of 100%. To receive anything at all, you must file a Proof of Claim with the Licensed Insolvency Trustee.

Do I have to do anything to be paid in a consumer proposal?

Yes. You must complete and submit a Proof of Claim to the Licensed Insolvency Trustee administering the proposal. The trustee distributes payments only to creditors with valid proven claims. If you don't file — for example because the debtor never listed you as a creditor and no package reached you — you can be left out of the payout entirely.

Can I still sue my friend for the money after they file a consumer proposal?

No, not while the proposal is in force. Filing triggers an automatic stay of proceedings under the Bankruptcy and Insolvency Act that stops unsecured creditors from starting or continuing legal action to recover the debt. Your recovery runs through the trustee and the proposal instead. If the proposal is later annulled or the trustee is discharged because it wasn't completed, your right to pursue the debt can revive.

How is the amount each creditor receives decided?

Once a proposal is approved, the debtor's payments to the trustee are distributed to creditors as dividends, shared proportionally among everyone who filed a valid claim, based on the size of each claim. There is no fixed percentage — it depends on what the debtor can afford and what creditors accepted. You may receive interim dividends during the proposal and a final dividend at the end.

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Recovering a loan · Consumer proposals · Canada

My friend filed a consumer proposal and owes me money — will I get paid?

Q: Do I get to vote on the consumer proposal?

Yes. Creditors can accept or reject the proposal, with one vote for every dollar of proven claim. If a majority by dollar value accepts (or no meeting is requested within 45 days, in which case it's deemed accepted) and the court approves it, the proposal binds all unsecured creditors, including those who voted against it. Creditors holding at least 25% of proven claims can request a meeting of creditors.

Lend Right Editorial Team · Canada · Updated June 2026

A friend who owes you money has filed a consumer proposal, and your first thought is the obvious one: does this mean I lose what I'm owed? Not exactly. A proposal doesn't cancel the debt — it converts it into a smaller, court-binding settlement you can actually collect a share of. But there's one step you have to take, and a deadline you can't ignore, or you really can end up with nothing.

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The short version: A consumer proposal doesn't erase what your friend owes you — it replaces the full debt with a smaller, court-binding settlement paid out over time. As an unsecured creditor you'll usually receive a portion of what you're owed (often a fraction of the dollar), but only if you file a Proof of Claim with the Licensed Insolvency Trustee. Miss that step and you can be left out of the payout entirely.

What a consumer proposal actually is

A consumer proposal is a formal insolvency process under the federal Bankruptcy and Insolvency Act (BIA). Your friend doesn't run it themselves — a Licensed Insolvency Trustee (LIT), the only professional the government authorises to file one, prepares an offer to all of their unsecured creditors and files it with the Office of the Superintendent of Bankruptcy (OSB). The offer is essentially: "instead of the full amount I owe everyone, I'll pay this reduced total over up to five years, and you'll forgive the rest."

Because it's federal law, the same process applies whether your friend is in Calgary, Toronto, Halifax, or anywhere else in Canada. The province doesn't change how the proposal works — only some background details, like what assets would have been protected in a bankruptcy, differ.

The moment they file: collection stops

As soon as the proposal is filed, an automatic stay of proceedings takes effect. For you as an unsecured creditor, that means you can no longer take or continue legal action to recover the debt — no lawsuit, no demand for payment outside the process, no garnishment. You also can't treat the filing itself as a reason to tear up some other arrangement you had with them. The debt isn't gone; it's frozen and folded into the proposal.

This is the part that stings

You lose the ability to chase the debt your own way. If you were about to sue in small claims court, that stops. From here, your recovery runs through the trustee and the proposal — not through you.

How you actually get paid: file a Proof of Claim

This is the single most important action you can take. When the proposal is filed, the trustee is required to send each known creditor a package with the proposal, a report, and a form. To be counted — and to be paid anything — you must complete and submit a Proof of Claim to the trustee. The OSB is explicit about this: to recover money owed to you, you file that claim with the LIT.

Your claim needs to show that the debt is real. This is exactly where lending on a handshake hurts: if you have a signed loan agreement, a promissory note, e-transfer records, or texts acknowledging the debt, your claim is easy to prove. If you have nothing, the trustee — and your friend — may simply not list you as a creditor at all, and you could be left out without ever knowing.

Were you even notified? The trustee only contacts creditors the debtor discloses. If your friend "forgot" to list you, no package arrives. It's worth confirming the filing independently and contacting the trustee directly — see our guide on how to check whether a consumer proposal was really filed.

How much will you get?

Here's the honest answer: usually a fraction of what you're owed, paid in instalments over the life of the proposal. The whole premise of a proposal is that creditors collectively accept less than the full amount — but more than they'd get if your friend simply went bankrupt instead. The exact percentage depends on what your friend can afford and what the creditors accept; there's no fixed rate, and it varies widely from one proposal to the next.

Once the proposal is approved, payments your friend makes to the trustee are distributed to creditors as dividends, divided proportionally among everyone who filed a valid claim. You might receive interim dividends along the way and a final one at the end. It won't make you whole — but a filed claim is the difference between receiving a share and receiving nothing.

Do you get a say? The vote

Yes — and your vote is weighted by money. Creditors are asked to accept or reject the proposal within 45 days, and each creditor gets one vote for every dollar of their proven claim. If a majority by dollar value accepts (or if no one requests a meeting within 45 days, in which case it's deemed accepted) and the court approves it, the proposal becomes binding on all unsecured creditors — even the ones who voted no.

So if you're a small creditor among many, you may not be able to block a proposal you dislike. But if you're owed a large share of the total, your vote carries real weight, and creditors holding at least 25% of proven claims can require a meeting to vote it down.

A consumer proposal isn't your friend escaping the debt — it's a court-supervised compromise. You trade the full amount you may never have collected anyway for a smaller amount that's actually enforceable and actually paid.

What if they don't keep up the payments?

A proposal isn't a guarantee. Under the BIA, if your friend falls far enough behind — broadly, the equivalent of three months' worth of payments in arrears — the proposal is deemed annulled. When that happens, the protection disappears and unsecured creditors can generally resume collecting the original debt (less anything already paid), unless the proposal is revived or the court orders otherwise. So a stalled proposal can hand you back your right to pursue the debt — though by then your friend's finances may be no better.

So, practically — will you get paid?

Partly, and only if you participate. Your realistic outcomes are: (1) file your claim and receive a proportional share of the proposal over its term; (2) do nothing and likely receive nothing; or (3) the proposal collapses and you regain the right to chase the full debt — with all the uncertainty that brought you here in the first place.

Your action list:

Confirm the filing and identify the Licensed Insolvency Trustee.
Gather your proof — agreement, note, transfers, messages.
File a Proof of Claim with the trustee, promptly.
Vote if the amount or your share makes it worthwhile.
Watch for default — an annulled proposal can revive your rights.

The lesson: provable debts get paid; vague ones get forgotten

Every creditor who struggles to claim in a proposal has the same problem — the loan lived only in memory. When a friend becomes insolvent, the people with a signed agreement or note file a clean claim and collect their share; the people with nothing in writing often can't prove they're owed anything and get left off the list. If you lend again, a short written agreement is what puts you on the creditor list instead of on the outside. Our guides on promissory notes vs loan agreements and protecting yourself when lending go deeper, and you can draft a clear agreement in minutes.

Make the next loan one you can actually enforce

A clear, signed agreement — who lent what, the repayment terms, both e-signatures — is the record that proves your claim if it ever lands in court or an insolvency. Free to draft.

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Sources referenced:

Office of the Superintendent of Bankruptcy (OSB) — You Are Owed Money: Consumer Proposals (Government of Canada)
Bankruptcy and Insolvency Act, RSC 1985, c. B-3 — Division II (consumer proposals), s. 69.2 (stay of proceedings), s. 66.28 (binding effect), s. 66.31 (deemed annulment)
OSB — Bankruptcy and Insolvency Records Search

General information only — confirm current rules with a Licensed Insolvency Trustee or the OSB.

This article is general information about Canadian insolvency law, not legal or financial advice, and Lend Right is not a law firm or a Licensed Insolvency Trustee. Consumer proposals are governed by the federal Bankruptcy and Insolvency Act, administered by Licensed Insolvency Trustees and overseen by the Office of the Superintendent of Bankruptcy; rules, forms, fees, and processes change over time. For your specific situation, speak with a Licensed Insolvency Trustee or a lawyer.