Can I Keep My House in a Consumer Proposal?

Yes. In most cases, you can keep your house when you go through a Consumer Proposal. A Consumer Proposal deals with your unsecured debt, and your mortgage is secured debt, which means your home is not surrendered as part of the process. As long as you stay current on your mortgage payments, your lender cannot force you out of your home because you filed a Consumer Proposal. At Metus Lykos Debt Law Firm, we help Ontario homeowners navigate this process every day, protecting what matters most while getting their debt under control.

We know how frightening it is to even ask this question. Your home is not just a financial asset. It is where your family lives and where you feel safe. The fear of losing it is real, and it keeps a lot of people from reaching out for help. So let us be clear up front: a Consumer Proposal is specifically designed to protect your assets, including your home.

Why Your House Is Protected in a Consumer Proposal

To understand why your home is protected, you need to understand one key distinction: secured debt versus unsecured debt.

Your mortgage is a secured debt. That means the lender holds a legal claim against your home as collateral. If you stop paying your mortgage, the lender can eventually move to take the property. But that risk exists whether or not you are in a Consumer Proposal. The proposal itself does not affect your mortgage.

A Consumer Proposal only deals with your unsecured debts. These are debts that are not tied to any specific asset. Things like credit card balances, personal loans, lines of credit, payday loans, and Canada Revenue Agency (CRA) tax debt. None of these have a claim on your home.

Because your mortgage stays outside the proposal entirely, your relationship with your mortgage lender continues on the same terms as before. You keep making your regular mortgage payments. The proposal reduces and restructures your unsecured debt load, which often frees up the monthly cash flow you need to keep up with housing costs.

The One Rule You Must Follow to Keep Your House

There is one non-negotiable condition: you must stay current on your mortgage payments.

Filing a Consumer Proposal does not give your mortgage lender any reason to call your loan. Canadian law does not allow a lender to declare a mortgage in default simply because a Consumer Proposal was filed. That would be a unilateral change to your lending agreement, which is not permitted.

However, if you fall behind on mortgage payments, that is a separate issue entirely. Missed payments give your lender grounds to enforce the mortgage, regardless of the Consumer Proposal. So the rule is simple: keep paying your mortgage on time, and your home stays yours.

How Home Equity Affects Your Consumer Proposal

This is where things get a little more detailed. While filing a Consumer Proposal does not force you to sell your home, the equity you have in your home can influence what your proposal needs to offer your creditors.

Here is the rule that governs this: under the Bankruptcy and Insolvency Act (Canada), your creditors must receive at least as much from your Consumer Proposal as they would receive if you filed for bankruptcy instead. This is called the “greater than bankruptcy” test.

In a bankruptcy, some of your equity above the provincial exemption threshold could be distributed to creditors. In Ontario, the homestead exemption is $10,000. That means if your home equity exceeds $10,000, that surplus equity is what creditors could theoretically access in a bankruptcy scenario. Your Consumer Proposal must account for this.

What This Means in Practice

Let us walk through two common scenarios to make this concrete.

Scenario A: Little or No Equity
Your home is worth $550,000. You owe $545,000 on your mortgage. Your equity is $5,000. In Ontario, that falls below the $10,000 homestead exemption. Creditors would receive nothing from your home equity in a bankruptcy. So your Consumer Proposal does not need to account for your home equity at all. You propose based on your income and what you can afford to pay each month.

Scenario B: Significant Equity
Your home is worth $700,000. You owe $480,000 on your mortgage. Your equity is $220,000. After the $10,000 Ontario exemption, creditors could access up to $210,000 of that equity in a bankruptcy. Your Consumer Proposal must offer your creditors at least that amount in total repayment terms, or they have reason to reject it. This does not mean you sell your house. It means your monthly proposal payments are structured to reflect what creditors could otherwise recover.

Consumer Proposal vs Bankruptcy: What Happens to Your Home

This is the comparison most people want to see. If you are weighing a Consumer Proposal against bankruptcy, home ownership is often the deciding factor. The differences are significant.

As the table shows, a Consumer Proposal offers significantly stronger asset protection than bankruptcy for homeowners. For a deeper look at how these two paths compare across all factors, read our full breakdown in Consumer Proposal vs Bankruptcy.

What Happens to Your Mortgage During a Consumer Proposal

Your mortgage does not change when a Consumer Proposal is filed. Here is what actually happens:

• Proposal is filed and accepted
  The formal Consumer Proposal is filed under the Bankruptcy and Insolvency Act by a Licensed Insolvency Trustee. An automatic stay of proceedings takes effect immediately. This stops all unsecured creditors from collecting, calling, or pursuing legal action.
• Your mortgage lender is not involved
  Because your mortgage is secured debt, your lender is not part of the Consumer Proposal process. They do not vote on your proposal. They do not receive payments through the proposal. Nothing about your mortgage changes.
• You continue making mortgage payments directly
  Your regular mortgage payments continue as normal, made directly to your lender. The proposal payments are separate and go toward your unsecured creditors.
• Financial breathing room opens up
  With interest frozen on unsecured debts and collections stopped, many clients find they can actually afford their mortgage payments more comfortably during the proposal than they could before.
• Proposal is completed and debt is discharged
  After you complete your proposal payments (up to 60 months), the remaining balance on your included unsecured debts is legally discharged. Your mortgage continues normally. You own your home free of the burden that brought you to this point.

Will My Mortgage Lender Find Out About My Consumer Proposal?

Yes, your Consumer Proposal becomes part of the public record. The Office of the Superintendent of Bankruptcy (OSB) maintains a searchable database called the Insolvency Insider. Your lender could look this up if they chose to.

In practice, most mortgage lenders do not actively monitor this database for existing clients. They typically only conduct a credit review when you apply for new credit, refinance, or renew your mortgage. That is the moment your Consumer Proposal becomes visible in the normal lending process.

What this means is that mortgage renewal can be a challenge while your Consumer Proposal is active or recently completed. Lenders may offer less favourable terms, require a larger down payment, or decline to renew at all through traditional channels. Planning around this is important, and it is something we discuss with every homeowning client who comes to us.

What About a Home Equity Line of Credit (HELOC)?

A HELOC is secured against your home, just like your mortgage. This means it sits outside the Consumer Proposal in most cases and is not included in your unsecured debt total.

However, there is a nuance. If a HELOC has been frozen or called by your lender, or if there is any dispute about its secured status, the classification can get complicated. Some HELOC products have both secured and unsecured components depending on how they were structured.

This is exactly the kind of situation where having a lawyer in your corner matters. We review your specific debt picture before any proposal is structured to make sure everything is classified correctly and nothing surprises you later.

Can I Sell My House While in a Consumer Proposal?

Yes, you can sell your home while a Consumer Proposal is active. However, the proceeds of the sale need to be handled carefully.

If your home sale generates equity, some or all of that equity may need to be contributed to your Consumer Proposal, depending on what was agreed to when the proposal was structured and accepted. In some cases, the proposal terms are amended to reflect the change in your financial situation. In others, the sale proceeds allow you to pay out the proposal in full ahead of schedule.

Every situation is different. If you are thinking about selling your home while in a Consumer Proposal, speak with us before making any decisions.

Can I Buy a House After a Consumer Proposal?

Yes. Buying a home after completing a Consumer Proposal is possible, though it takes some planning and patience.

A Consumer Proposal leaves an R7 credit notation on your credit report for 3 years after the proposal is fully completed. During that window, mortgage options through traditional “A lenders” (major banks) will be limited. Many clients who want to buy a home after a proposal use this time to rebuild their credit score, save a stronger down payment, and work toward qualifying through conventional lending again.

Some lenders, including alternative and private lenders, will work with borrowers who are past the proposal completion stage, even within the 3-year window. The interest rates and terms will not be as favourable, but homeownership is not off the table.

In contrast, a bankruptcy leaves an R9 notation on your credit file for 6 to 7 years after discharge. That is a significantly longer period before traditional mortgage qualification becomes realistic again. For anyone with homeownership goals, this difference alone often makes the Consumer Proposal the stronger path.

Why Working with a Law Firm Is Different

Most people learn about Consumer Proposals through a Licensed Insolvency Trustee (LIT). A trustee is a regulated professional who administers the formal insolvency process. But there is something critical to understand: a trustee’s legal duty is to administer the process impartially. They do not exclusively represent you. They have obligations to your creditors as well.

We are a law firm. Our legal duty runs entirely to you, our client. When we sit down to analyze your situation, our only job is to protect your interests and find the best legal outcome for you. That includes reviewing whether your home equity is being correctly accounted for, whether the proposal terms being offered are actually fair, and whether there are legal strategies available to you that a trustee-only approach might not surface.

We work with the formal Consumer Proposal process and coordinate with Licensed Insolvency Trustees where needed. But we do it as your legal representative, not as a neutral administrator.

“We work for you. Not your creditors.”

That is not a marketing line. It is a legal reality. And for homeowners especially, where the stakes are this high, that distinction matters.

Learn more about the difference in approach in our post on the Licensed Insolvency Trustee vs Debt Lawyer comparison.

Who Qualifies for a Consumer Proposal in Ontario?

To be eligible, you generally need to meet all of these criteria:

• You have between $10,000 and $250,000 in unsecured debt (not counting your mortgage)
• You are insolvent, meaning you cannot pay your debts as they come due
• You have a source of income or assets that allows you to make regular proposal payments
• You have not already completed a Consumer Proposal in the past 6 years

If your unsecured debt exceeds $250,000, a Division 1 Proposal may be available. This is a more complex, court-supervised process designed for individuals or businesses with larger debt loads. It offers similar protections, including the ability to keep your home, but operates under different rules.

Frequently Asked Questions

Can my mortgage lender kick me out of my home because I filed a Consumer Proposal?

No. Filing a Consumer Proposal does not give your mortgage lender grounds to demand repayment or force you out of your home. Your mortgage is a separate, secured agreement. As long as you continue making your regular mortgage payments on time, your lender cannot take action against you solely because a Consumer Proposal was filed.

Does filing a Consumer Proposal affect my mortgage interest rate?

No, not immediately. Your existing mortgage terms, including your interest rate, do not change when a Consumer Proposal is filed. The impact comes at renewal time. When you renew your mortgage while a Consumer Proposal is active or recently completed, lenders will see the notation on your credit report and may offer different terms or require you to find alternative financing.

What if I have a lot of home equity? Can I still do a Consumer Proposal?

Yes. Having significant home equity does not disqualify you from a Consumer Proposal. It does influence the terms. Your proposal must offer creditors at least as much as they would receive in a bankruptcy, and in a bankruptcy, equity above the Ontario exemption of $10,000 could be distributed. So your proposal payments may need to reflect that value. But you keep your home throughout the process. You do not sell it or surrender it.

What happens to my home equity line of credit (HELOC) in a Consumer Proposal?

A HELOC is generally a secured debt, which means it is not included in the Consumer Proposal and remains outside the process. You continue making any required HELOC payments directly to your lender. However, the structure of some HELOCs can vary, so we review every client’s specific debt products before any proposal is structured.

Can I refinance my mortgage while in a Consumer Proposal?

This is difficult during an active Consumer Proposal. Most traditional lenders will not refinance a mortgage for someone actively in a proposal. Alternative or private lenders may be willing to do so, but at higher interest rates. Refinancing typically becomes more accessible after the proposal is completed and you have had time to rebuild your credit.

Can I sell my house while a Consumer Proposal is active?

Yes. You can sell your home while in a Consumer Proposal. Any equity generated by the sale may need to be addressed within the terms of your proposal. In some cases, sale proceeds allow you to pay out the proposal in full early. The specifics depend on how your proposal was structured. We walk clients through this scenario before any sale is made.

Does a Consumer Proposal show up on my mortgage documents?

The Consumer Proposal does not appear on your mortgage itself, but it does appear on your credit report. Any lender who pulls your credit report during the proposal period or for 3 years after completion will see the R7 notation. This is relevant for renewals, refinancing, and new purchase applications.

How long after completing a Consumer Proposal can I get a new mortgage?

There is no mandatory waiting period, but in practice, most traditional lenders want to see the R7 notation removed from your credit file, which happens 3 years after your proposal is completed. During those 3 years, some alternative lenders may still work with you, especially if you have rebuilt your credit score and saved a larger down payment. Many of our clients set a goal of buying or refinancing within 3 to 5 years of completing their proposal.

Is a Consumer Proposal better than bankruptcy for keeping my house?

In almost every case, yes. A Consumer Proposal explicitly protects your assets, including your home. In a bankruptcy, equity above the provincial exemption threshold can be claimed by the trustee and distributed to creditors, which in some situations could require a forced sale. A Consumer Proposal keeps your home ownership intact while restructuring your unsecured debt. The credit impact is also significantly shorter, at 3 years after completion versus 6 to 7 years for a bankruptcy.

What if I am behind on my mortgage payments? Can a Consumer Proposal help?

A Consumer Proposal stops collections on your unsecured debts immediately. That financial relief, including frozen interest charges and stopped wage garnishments, often frees up enough monthly cash flow to catch up on mortgage payments. However, a Consumer Proposal does not directly address mortgage arrears. If you are significantly behind on your mortgage, we need to look at your full picture and explore whether additional legal strategies are available alongside the proposal.

Can both my partner and I file a Consumer Proposal to protect our jointly owned home?

Yes. Spouses or partners can file Consumer Proposals individually. If you have joint unsecured debts, both parties typically need to address those debts through their respective proposals. The jointly owned home is treated the same way: it remains yours as long as mortgage payments continue. We often work with couples together to coordinate both proposals effectively.