You filed a consumer proposal or went bankrupt. You got through it. Now you want to own a home — or keep the one you have. The question every lender is going to ask: how long ago, and what have you done since?
This guide gives you the straight answer. No sugarcoating — lenders are strict about insolvency history, the timelines are real, and the path back to mortgage qualification requires deliberate steps. But it is absolutely achievable, and plenty of Canadians do it every year.
- Consumer proposal on credit file: 3 years after completion (rated R7)
- First bankruptcy on credit file: 6 years after discharge (rated R9)
- A lender mortgage after either: typically 2 years post-completion/discharge + rebuilt credit
- B lender mortgage after either: often 1–2 years post-completion/discharge
- Private mortgage during or after either: possible immediately, equity-based
What Is a Consumer Proposal vs. Bankruptcy?
Both are formal insolvency proceedings administered by a Licensed Insolvency Trustee (LIT) in Canada. They are not the same thing — and the difference matters significantly for your mortgage future.
A consumer proposal is a negotiated settlement. You offer to repay a portion of what you owe — often 30 to 50 cents on the dollar — over a period of up to 5 years. Creditors vote on it. If accepted, you make fixed monthly payments to the trustee, who distributes funds to creditors. You keep your assets. The moment the proposal is filed, collection calls stop and legal proceedings against you are stayed.
Bankruptcy is more severe. Your non-exempt assets are surrendered to the trustee for distribution to creditors. In Ontario, certain assets are exempt (primary residence equity up to a limit, RRSP contributions older than 12 months, basic household furnishings). A first-time bankrupt with no surplus income is typically discharged in 9 months. If you have surplus income above the threshold, the process extends to 21 months. A second bankruptcy is 24 months minimum.
The decision between a consumer proposal and bankruptcy involves many factors beyond mortgage timing — asset protection, income, total debt, type of creditors, and more. That decision belongs to a Licensed Insolvency Trustee, not a mortgage broker. What this article covers is what happens to your mortgage options after each one. If you haven't filed yet and are weighing options, consult a LIT first.
How Each Shows Up on Your Credit File
Canada has two major credit bureaus: Equifax and TransUnion. Both record insolvency proceedings using a rating system. The key ratings to understand:
| Rating | What It Means | Associated With |
|---|---|---|
| R7 | Making payments through a special arrangement | Consumer proposal, debt management plan |
| R9 | Bad debt, placed for collection, or bankruptcy | Bankruptcy, debt written off |
The R9 rating (bankruptcy) is the worst possible credit rating. R7 (consumer proposal) is one step better — it signals you attempted to repay, which lenders view more favourably.
| Factor | Consumer Proposal | First Bankruptcy | Second Bankruptcy |
|---|---|---|---|
| Credit bureau rating | R7 | R9 | R9 |
| Stays on Equifax/TU | 3 years post-completion | 6 years post-discharge | 14 years post-discharge |
| Typical duration | Up to 5 years to complete | 9 months (no surplus income) | 24 months minimum |
| Total credit impact window | Up to 8 years from filing | ~6 yrs 9 months from filing | ~16+ years from filing |
| Keep home equity? | Yes | Depends on equity vs. exemption | Depends on equity vs. exemption |
| Lender perception | Attempted repayment — more favourable | Full discharge — less favourable | Repeat — most difficult |
The Mortgage Timeline: When Can You Qualify Again?
There are three tiers of lenders in Canada — A (chartered banks), B (alternative lenders), and private. Each has different tolerance for insolvency history.
During an Active Proposal or Undischarged Bankruptcy
A and B lenders: Will not approve a mortgage. Full stop.
Private lenders: May approve if you have substantial home equity — typically requiring the combined loan-to-value (CLTV) to be 65% or less. Private lenders are asset-based, not credit-based. The property secures the loan, not your credit score.
After Completion / Discharge — The Road Back
What "Re-Established Credit" Actually Means
This is the piece most people miss. Lenders don't just look at how long ago your insolvency occurred — they look at what you've done since. "Re-established credit" has a specific meaning in mortgage underwriting:
- Minimum 2 active credit trade lines — credit cards, car loans, lines of credit
- Minimum $2,500 limit each (some lenders require $5,000)
- Minimum 2 years of payment history on each trade line — post-insolvency
- Zero missed or late payments since discharge/completion — one late payment can reset the clock
- Credit score rebuilding — typically needs to reach 600+ for B lenders, 680+ for most A lenders
The clock on re-established credit starts the day you open your first new account post-insolvency. Get a secured credit card the week your proposal is complete or your bankruptcy is discharged. Charge $50 a month to it. Pay it in full. That 24-month runway starts now — not whenever you get around to it.
Down Payment Requirements After Insolvency
Even if the timeline and credit re-establishment boxes are checked, you typically cannot access the minimum 5% insured mortgage programs after insolvency. Expect:
- Private lenders: Lending based on equity only — no minimum down payment rule, but maximum LTV applies (typically 65%)
- B lenders: Generally require 20% down payment minimum; some require 25–30% depending on how recent the insolvency is
- A lenders: Some will do 20% down; others require 25–35% depending on credit recovery and time elapsed
- CMHC insured (5% down): Generally not available until insolvency is fully off the credit bureau
Real Scenario: Consumer Proposal — Mississauga Homeowner
The Situation
Homeowner filed a consumer proposal in 2022 with $68,000 in unsecured debt. Proposal completed in 2025 — paid creditors 40 cents on the dollar over 3 years. Home retained throughout (owned jointly with spouse who was not part of the proposal). Now in 2026, wants to refinance to consolidate a remaining car loan.
Outcome: 1 year post-completion with 2 rebuilt trade lines. R7 still showing on bureau — 2 more years until it falls off. B lender approved the refinance at 80% LTV with 2 years of clean payment history post-proposal. Rate higher than A lender but deal closed. Plan: reapply to A lender in 2027 when bureau clears and refinance again at lower rate. OAC — numbers illustrative.
Can a Private Mortgage Help You Bridge the Gap?
Yes — and this is where a broker adds real value. If you own a home during or after insolvency, a private mortgage can:
- Prevent power of sale if you're falling behind on an existing mortgage
- Consolidate remaining debts at a single payment while you rebuild credit
- Bridge the 1-2 year gap until B lender approval is possible
- Fund a purchase if you have a 35%+ down payment and sufficient equity story
Private mortgages are not a long-term strategy — the rates are higher, the terms are short (typically 1 year), and the fees are real. But used deliberately as a bridge to B and then A lender financing, they are a legitimate and effective tool.
- Missing a single payment post-insolvency — this resets lender confidence and can extend your timeline significantly
- Applying to multiple lenders at once — multiple hard pulls damage the credit you're trying to rebuild
- Taking on high-interest consumer debt to build credit — secured credit cards and small RRSP loans are sufficient
- Waiting to start rebuilding credit — every month you delay is a month added to your mortgage timeline
Frequently Asked Questions
Already Through It? Let's Map Your Path to Mortgage Approval
The timeline is mechanical — but navigating which lender to approach, when, and with what credit profile is where a broker earns their keep. I work with A lenders, B lenders, and private lenders. I know exactly what each one needs to see post-insolvency and when to approach them.
Disclaimer: This article is general information only and does not constitute financial, legal, or insolvency advice. Credit bureau reporting timelines are approximate and may vary by bureau and individual circumstance. Mortgage terms OAC and subject to change. If you are considering a consumer proposal or bankruptcy, consult a Licensed Insolvency Trustee (LIT). Paul Hunjan is a licensed Mortgage Broker (#M09001187) under MA Mortgage Architects #12728, FSRA regulated — not a lender and not an insolvency trustee.
