Can I Keep My House If I Make a Consumer Proposal?

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“Can I keep my house if I make a consumer proposal?” This is one of the most common questions Canadians ask when exploring debt relief options.

The short answer is – Yes – if you want to and subject to a few conditions which we talk about below…

If you’re struggling with debt but worried about losing your home, you’re not alone. For many, the fear of losing their house is what holds them back from seeking help — but the reality is far more reassuring: filing a consumer proposal does not automatically put your home at risk.

A consumer proposal is a formal, legally binding agreement to repay all or a portion of your unsecured debts — such as credit cards, personal loans, and tax debt — based on what you can afford. It halts collection action, offers protection from creditors, and is specifically designed to help you reduce your debt burden without forcing the sale of essential assets like your home.

However, certain conditions need to be met to make this possible, and a Licensed Insolvency Trustee (LIT) plays a central role in guiding you through this process. With guidance from a LIT, it’s often possible to structure a repayment plan that provides meaningful debt relief while allowing you to stay in your home.

While your mortgage and home equity do factor into the process, most homeowners who file consumer proposals are able to retain their property — especially when they remain current on mortgage payments and commit to the proposal terms. Understanding how your home fits into the equation can help you move forward with confidence and clarity.

The factors that will affect keeping your home?

1. You’re Current on Mortgage Payments
   

   Your mortgage is a secured debt — it’s backed by your home. A consumer proposal does not affect secured creditors, so your mortgage remains in place and must continue to be paid as agreed. If you’re up to date and continue paying, your lender typically has no reason to foreclose on the house.

2. The Extent of your Home Equity
   

   Creditors review your net equity (home value minus what you owe on your mortgage). If your equity is low or moderate, creditors may accept a reasonable proposal. If you have substantial equity, creditors may want a higher repayment in the proposal. But even here there are plans which can facilitate satisfying the creditors as well as letting you keep your home.

3. You Remain Financially Stable
   

   The consumer proposal must leave you with enough room in your monthly budget to keep up with mortgage payments, property taxes, and proposal payments. In other words, you’ve got to be able to keep up the payments on both the proposal and your mortgage.

How a Licensed Insolvency Trustee Helps You Keep Your House

A Licensed Insolvency Trustee is the only professional authorized by the federal government to file consumer proposals and bankruptcies. Their expertise is critical in helping you balance debt relief with asset protection, including your home.

Here’s how they help:

1. Detailed Equity Assessment
   The LIT will:

• Review the current market value of your property.
• Confirm the balance owing on your mortgage(s).
• Determine the net equity available to you.

If there’s little or no equity, it strengthens the case for you to keep the home without needing to offer extra value in your proposal.

If there is significant equity, the LIT will:

• Help you explore options like increasing your proposal offer to creditors.
• Possibly suggest refinancing or restructuring your mortgage to free up cash flow (if feasible).

2. Customized Proposal Design
LITs prepare a repayment plan that reflects:

• Your household budget and ability to pay.
• Your need to keep your home as a secure place for your family.
• Creditors’ expectations (especially if equity is high).

This plan is presented to your creditors for approval. Most consumer proposals are accepted because they offer a better return than a bankruptcy.

3. Legal Protection from Unsecured Creditors
As soon as your consumer proposal is filed, the LIT triggers an automatic stay of proceedings, which:

• Stops collection calls, wage garnishments, and lawsuits from unsecured creditors.
• Gives you breathing room to focus on essential payments, like your mortgage.

This does not apply to your mortgage lender — they can still take action if you miss mortgage payments. But by reducing unsecured debt obligations, the proposal often makes it easier to keep up with your mortgage.

4. Debt Relief Without Home Loss

If you filed for bankruptcy instead of a proposal, and you had substantial home equity, the LIT might be legally required to sell the home to pay creditors. In a consumer proposal, however:

• You can keep your home.
• You offer a fair monthly payment based on your income and assets.
• You retain control of your assets, which is a key benefit of proposals over bankruptcy.

5. Support Throughout the Process
Your LIT:

• Offers financial counselling to help you budget and rebuild credit.
• Helps you manage priorities (e.g., mortgage vs. unsecured debt).
• Adjusts your plan if your financial situation changes during the term of the proposal.

What Happens If You Have Too Much Equity?

If your home equity is high (e.g., $50,000 or more), unsecured creditors may expect a proposal that offers a similar return to what they’d receive in a bankruptcy (where the home might be sold). In that case, your LIT may:

• Propose higher monthly payments over a longer period (up to 5 years).
• Suggest borrowing against equity (e.g., refinance or second mortgage), though this comes with risk.
• Explore ways to offset your equity through higher proposal payments while preserving your ownership.

When You Might Be at Risk of Losing Your Home

Although a consumer proposal protects many assets, here are situations where your house could be at risk:

• You fall behind on mortgage payments after filing.
• You have substantial equity but can’t meet the repayment terms creditors demand.
• Your consumer proposal is rejected (this is rare if guided by a skilled LIT).

A Strategic Approach to Debt and Keeping Your Home

A consumer proposal is one of the most effective and accessible debt relief solutions available to Canadians — especially for those who are determined to protect their home while regaining control of their finances. Unlike bankruptcy, a consumer proposal allows you to reorganize your unsecured debts into one affordable monthly payment without surrendering your house or other important assets.

That said, it’s important to approach the process with a full understanding of your financial picture. Your ability to keep your home depends on key factors, including staying current on your mortgage, managing your home equity responsibly, and committing to the terms of the proposal. If you’re already facing challenges with mortgage payments or have significant equity, your Licensed Insolvency Trustee will work with you to explore realistic options that balance the interests of both you and your creditors.

The guidance of a Licensed Insolvency Trustee (LIT) is critical. They serve not only as an administrator of your proposal but as a trusted advisor who helps you navigate complex decisions, deal with creditors, and design a plan that meets your long-term financial goals. With their help, thousands of Canadians have successfully avoided bankruptcy, kept their homes, and rebuilt their financial future.

Ultimately, a consumer proposal offers the chance to reset — to stop the stress of mounting debt, avoid legal action, and protect what matters most. If your home is central to your life, your family, and your stability, it’s entirely possible to keep it — as long as you take the right steps with professional support.

Ready to Take the First Step?

If you’re worried about debt but want to protect your home, the best thing you can do is speak with a Licensed Insolvency Trustee. Your first consultation is free, confidential, and with no obligation. You’ll get a clear picture of your options and a personalized plan tailored to your situation.

Schedule your free consultation with a Licensed Insolvency Trustee today and take the first step toward a debt-free future — without giving up the place you call home.

Contact Richard Killen
FREE No Commitment Consultation

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