Debt Consolidation or Consumer Proposal: Which Solution to Choose in Quebec?
More people than we think are struggling with significant debt and looking for solutions to regain control of their personal finances.
Two options often stand out: debt consolidation and the consumer proposal. Although they essentially share the same goal (lightening your monthly debt burden), they are not accessible to everyone and function very differently.
This article will help you understand these two personal debt solutions so you can make the best choice for your situation.
Debt Consolidation in Quebec
Getting a debt consolidation in Quebec (also called a consolidation loan) involves working with a bank or credit union to group all your debts into a single bank loan.
These debts can include credit card balances, lines of credit, personal loans, car loans, or others… You will then be able to access a lower interest rate and only have one monthly payment to make.
You may be eligible for consolidation if:
You are able to repay the required monthly amount.
Your credit score is good.
You have sufficient income.
The debts must still be repaid in full over a period determined by the financial institution.
It’s important not to misunderstand what this is: consolidation is not debt forgiveness. You still have to repay the total amount, but under slightly less restrictive conditions. The main changes are the interest rate… and the clarity of your budget. It’s like trading several stressful small bills for a single, easier-to-manage one.
What Is a Consumer Proposal?
This is a solution offered by the government to help people get out of debt. This legal process is overseen by a Licensed Insolvency Trustee such as Gobeil Groupe Conseil.
A consumer proposal in Quebec allows an individual to negotiate with their creditors (with the help of the trustee) to repay only a portion of their debts (often between 30% and 70%) over a maximum period of 5 years.
The entire process is interest-free, and the remaining portion of the unpaid debt is canceled once the proposal is completed.
Unlike consolidation, this option is governed by the Bankruptcy and Insolvency Act. It also protects you against creditor legal actions (seizure of assets, harassing calls, etc.) as soon as it is filed.
Eligibility Requirements:
Being insolvent (having more debt than assets).
Owing less than $250,000 (excluding your residential mortgage).
Willingness to repay a reasonable portion of your debts.
Having a steady income.
Having a weakened credit record.
Comparison: Debt Consolidation vs. Consumer Proposal
| Criteria | Debt Consolidation | Consumer Proposal |
| Type of Solution | Bank loan | Legal agreement with creditors |
| Key Player | Bank or credit union | Licensed Insolvency Trustee |
| Credit Record Required | Good or very good credit | Weakened or poor credit |
| Interest Rate | Reduced, but still present | 0% (no interest) |
| Amount to Repay | 100% of principal plus interest | Often between 30% and 70% of total due |
| Repayment Duration | Variable (often 2 to 5 years) | Maximum 5 years |
| Creditor Protection | None | Yes, as soon as the proposal is filed |
| Impact on Credit | Moderate (“consolidated loan” note) | Significant (R7 rating, but temporary) |
| Accessibility | Limited to solvent individuals | Accessible for insolvency (more debt than assets) |
Case Study: Karine Chooses a Consumer Proposal
Karine, 37, works full-time and is raising two children on her own. For several years, her debts have been piling up (credit cards, personal loan, line of credit, car loan, etc.). In total, she owes approximately $38,000.
She tries to make the required minimum payments, but the interest rates are high, and she can no longer reduce the principal.
She consults her bank for a debt consolidation loan. Unfortunately, her credit record is marred by several late payments. The bank refuses her application.
Karine then discovers the consumer proposal, a legal alternative in Quebec for people in debt. She contacts the Licensed Insolvency Trustee Gobeil Groupe Conseil, who evaluates her situation.
The trustee confirms that Karine is eligible for a proposal. An agreement is negotiated: she will repay $15,000 over 5 years, interest-free. Her monthly payments will now be $250, a realistic amount within her budget.
In addition to benefiting from considerable relief, she stops receiving calls from her creditors, and her stress disappears because she knows she will get through it! Although her credit record is temporarily affected, she knows she now has a clear path toward financial stability.
Choosing Based on Your Situation
Debt consolidation is an option for individuals who wish to repay their debts in full but through a single monthly payment (grouping credit card debt and other debts into one personal loan). The total interest will be lower than if the person had continued to pay their high-interest cards and loans separately.
As for the consumer proposal, it is an attractive option for those who have become unable to make their minimum payments each month but have a stable income. In this case, the proposal offers true relief. It is a legal agreement, overseen by a licensed trustee, that allows you to reduce the total amount to be repaid, freeze interest, and above all, end the pressure from creditors. Unlike bankruptcy, you do not lose your assets.
Every case is different. Before choosing, it is best to discuss it with an expert. Gobeil Groupe Conseil, a Licensed Insolvency Trustee, can support you in this reflection in a neutral and confidential manner. This type of conversation commits you to nothing but can make all the difference.
Get More Information!
Want to learn more about consumer proposals in Quebec? Speak for free with our advisor to find out if you are eligible.
Book your evaluation meeting now! Our advisors serve the entire province.
Gobeil Groupe Conseil, a Licensed Insolvency Trustee, is proud to help hundreds of people each year regain control of their personal finances.
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