How can a creditor sue me if I had a consumer proposal?

While a proposal is in force, a stay of proceedings stops most lawsuits. If the proposal was annulled or ended, that stay is gone — so a creditor can start or resume a lawsuit for the balance still owing.

Do I still have any defences after a failed proposal?

Possibly. Depending on the dates and paperwork, you may be able to raise an expired limitation period, dispute the amount, require the creditor to prove it owns the debt, or account for payments already made through the proposal. A review of the dates is the place to start.

Should I just let them win since I already owe it?

No. Even where money is owed, responding preserves the ability to dispute the amount, force proof, negotiate a manageable settlement, and protect home equity from a judgment and writ. Ignoring the claim forfeits all of that.

Your Consumer Proposal Failed and a Creditor Is Suing You

Reviewed by Angelos Spingos, Principal Lawyer, Spingos Law · Licensed by the Law Society of Ontario · Last reviewed June 29, 2026

If a proposal that once protected you has ended and a creditor has now filed suit, this is the time-sensitive moment. The protection is gone, but a lawsuit still has rules — and those rules can work in your favour if you act quickly.

If you have been served, act within 20 days. In Ontario you generally have 20 days to serve and file a Statement of Defence (a Notice of Intent to Defend adds 10). Miss it and the creditor can obtain a default judgment for the full amount. What to do the day you are served →

Why the lawsuit is happening now

A consumer proposal pauses collection through a stay of proceedings. When the proposal is annulled or otherwise ends, that stay lifts and the creditor is free to pursue the remaining balance — often by starting or restarting a lawsuit.

What still works in your favour

Even after a failed proposal, a debt lawsuit can frequently be defended or settled. Depending on facts:

Limitation period. Ontario’s two-year limitation period may apply — though steps taken during the proposal can affect the dates, so this needs a careful look.
Proof of the debt. A creditor (especially a collection agency that bought the account) must be able to prove it owns and can document the claim.
The amount. Payments made through the proposal should be credited; the figure claimed may be wrong.
Settlement. Many claims resolve for less once a defence is on the record.

What is at stake for a homeowner

If a creditor wins a judgment, it can enforce it — wage garnishment, a bank garnishment, or a writ of seizure and sale registered against your home. That sequence (sue → judgment → enforcement) is exactly why the 20-day window matters so much.

Frequently asked questions

How can a creditor sue me if I had a consumer proposal?: While a proposal is in force, a stay of proceedings stops most lawsuits. If the proposal was annulled or ended, that stay is gone — so a creditor can start or resume a lawsuit for the balance still owing.
How long do I have to respond to the Statement of Claim?: If you were served in Ontario, you generally have 20 days to serve and file a Statement of Defence. A Notice of Intent to Defend adds 10 days. Missing the deadline can lead to a default judgment for the full amount.
Do I still have any defences after a failed proposal?: Possibly. Depending on the dates and paperwork, you may be able to raise an expired limitation period, dispute the amount, require the creditor to prove it owns the debt, or account for payments already made through the proposal. A review of the dates is the place to start.
Should I just let them win since I already owe it?: No. Even where money is owed, responding preserves the ability to dispute the amount, force proof, negotiate a manageable settlement, and protect home equity from a judgment and writ. Ignoring the claim forfeits all of that.

Sources

Ontario Rules of Civil Procedure (rr. 18, 19) · Limitations Act, 2002 · Bankruptcy and Insolvency Act. General information for Ontario, not legal advice.