Does a promissory note protect me if the borrower files a consumer proposal?

It protects your ability to prove the debt, not your position in line. A plain signed promissory note is an unsecured debt, so a consumer proposal binds it like any other unsecured claim — you'll receive a proportional share of the proposal rather than the full amount. The note's real value is as strong evidence when you file your Proof of Claim, so the trustee accepts your claim at full value.

Is a promissory note a secured or unsecured debt?

On its own, a promissory note is unsecured. It's a written promise to repay, but it doesn't give you a registered interest in any specific property. It only becomes secured if it's backed by registered security — for example a mortgage on real estate or a security interest registered under a provincial Personal Property Security Act. Most family and friend notes are unsecured.

Can I still collect from a co-signer or guarantor after the borrower files a consumer proposal?

Generally yes. A consumer proposal binds the person who filed it, not anyone else who promised to pay. A co-signer's or guarantor's obligation typically survives the borrower's proposal, so you can pursue that person directly for the debt while the proposal runs. This is often a note-holder's strongest path to full recovery.

What do I do with my promissory note once the borrower files?

Don't try to enforce it directly — the automatic stay prevents that. Instead, file a Proof of Claim with the Licensed Insolvency Trustee and attach the note, proof you advanced the money, and any record of repayments. The note is among the strongest evidence of a private debt, which helps the trustee accept your claim at full value and maximise your share of the payout.

Does a promissory note give me priority over other creditors in a consumer proposal?

No. A plain promissory note doesn't rank you ahead of other unsecured creditors — everyone unsecured shares proportionally based on the size of their proven claims. The only ways to rank ahead are to hold valid registered security over property (making you a secured creditor) or to have another person, like a guarantor, separately liable for the debt.

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Recovering a loan · Consumer proposals · Canada

I have a signed promissory note, but the borrower filed a consumer proposal — am I protected?

Lend Right Editorial Team · Canada · Updated June 2026

Holding a signed promissory note feels like protection — you did the responsible thing and got it in writing. So when the borrower files a consumer proposal, it's reasonable to ask whether that note keeps you safe. The honest answer is layered: the note is powerful in one specific way and powerless in another, and knowing the difference tells you exactly how much you can expect to recover.

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The short version: A signed promissory note is excellent evidence of the debt — but on its own it's an unsecured debt, so a consumer proposal binds it like any other unsecured claim. The note doesn't put you ahead of other creditors. What it does do is make your Proof of Claim airtight. The two things that genuinely give you priority are security (a registered interest in property) and a co-signer or guarantor, whose obligation survives the borrower's proposal.

First, what your promissory note is — and isn't

A promissory note is a written, signed promise to repay a defined sum on defined terms. It's a real, enforceable document, and having one puts you far ahead of a lender who has nothing. But a plain note is just that — a promise. It records that the debt exists; it doesn't, by itself, give you a claim against any specific piece of the borrower's property. In insolvency terms, that makes you an unsecured creditor: someone the borrower owes, but who has no direct hold over their assets.

That distinction is the whole game in a consumer proposal. The process draws a hard line between secured and unsecured creditors, and your note, unless it's tied to registered collateral, lands you on the unsecured side.

Secured vs unsecured — where your note sits

Secured creditor	Has a registered legal interest in specific property (a mortgage, a lien, a PPSA-registered security). Their rights over that property are largely untouched by the proposal.
Unsecured creditor	Is owed money but has no claim on particular property. Bound by the proposal; shares proportionally in whatever it pays out.
A plain promissory note	Unsecured. Strong proof of the debt — but no priority over other unsecured creditors.

So how does the proposal treat your note?

Like any unsecured debt. Once the borrower files, the automatic stay stops you from suing on the note or otherwise enforcing it directly. If the proposal is accepted by the required majority of creditors and approved by the court, it becomes binding on all unsecured creditors — including you, the note-holder, and including you even if you voted against it. You'll then receive a share of the proposal payments rather than the full face value of the note.

In other words: the promissory note doesn't shield you from the proposal. A borrower can include a noted debt in a proposal just as easily as a credit-card balance. What the note changes is not whether you're bound — it's how cleanly you can claim your share.

Where the note genuinely helps: proving your claim

To get anything out of a proposal, every unsecured creditor has to file a Proof of Claim with the Licensed Insolvency Trustee, and the claim has to stand up. This is exactly where the note earns its keep. A creditor with a vague "they owe me money" story can have their claim questioned or undervalued. A creditor holding a signed promissory note has a clean, dated, signed instrument stating the amount and terms — about the strongest evidence of a private debt you can bring.

What to attach to your Proof of Claim: the signed promissory note itself, proof you advanced the money (e-transfer or bank records), and any record of repayments already made or demanded. Together these let the trustee accept your claim at full value, which maximises your proportional share of the payout.

The two things that actually beat a proposal

1. A secured note

If your note was backed by registered security — a mortgage on real property, or a security interest registered under your province's Personal Property Security Act — you're a secured creditor, and that's a different world. A consumer proposal deals with unsecured debt; it generally doesn't strip a valid secured creditor's rights in the underlying collateral. Most family and friend loans are not secured this way, which is precisely why the note alone leaves you unsecured. Whether a security interest was properly created and registered is a legal question worth confirming with a professional.

2. A co-signer or guarantor

This is the protection most people overlook. A consumer proposal binds the person who filed it — not anyone else who promised to pay. If your note was also signed by a co-signer or guarantor, that person's obligation generally survives the borrower's proposal. You can pursue the guarantor for the debt directly, in parallel with the proposal, because they're a separate party under a separate promise. A borrower's insolvency doesn't release the people who backed them.

This cuts both ways

If you co-signed or guaranteed a loan and the primary borrower files a proposal, you can still be on the hook for the whole amount — the lender can come to you. Being a guarantor is not a passive role.

A promissory note proves the debt; it doesn't rank the debt. To move up the queue you need security or a second person on the hook — not just a better-worded IOU.

Putting it together: are you protected?

Partly, and it depends entirely on what kind of note you hold:

Plain signed note (most common): you're an unsecured creditor, bound by the proposal, but with strong proof to file a full-value claim and collect your proportional share.
Note with a co-signer or guarantor: you can pursue the other signer for the balance regardless of the borrower's proposal — often your best real recovery.
Note backed by registered security: you're a secured creditor, and your rights in the collateral are largely preserved.

Your move now: confirm the proposal is real and find the trustee (how to check a filing), file a Proof of Claim with the note attached (what claiming and getting paid looks like), and — if anyone else signed — pursue the co-signer or guarantor separately.

The lesson: a note is a floor, not a ceiling

A promissory note is genuinely worth having — it's the difference between a provable claim and an argument. But people often treat a note as full armour against non-payment, and a consumer proposal shows where that armour ends: it protects your ability to prove the debt, not your position in line. If protecting the money matters, the stronger setups are a full loan agreement with proper terms, registered security where the sum justifies it, or a co-signer. Our guides on promissory note vs loan agreement and whether a promissory note is enough compare the options, and you can build a complete loan agreement in minutes.

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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:

Bankruptcy and Insolvency Act, RSC 1985, c. B-3 — Division II, s. 66.28 (binding on unsecured creditors), s. 69.2 (stay), treatment of secured vs unsecured claims
Office of the Superintendent of Bankruptcy (OSB) — You Are Owed Money: Consumer Proposals (Government of Canada)
OSB — Form 31, Proof of Claim

General information only — a Licensed Insolvency Trustee or lawyer can confirm how your note is treated.

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.