Consumer Proposal Vs Bankruptcy: Decision Factors to Consider

When you’re struggling with your finances you might come across two key options – filing for bankruptcy and filing a consumer proposal.

And although they are very similar options, as they both are designed to eliminate debt, offer you a repayment plan that suits your requirements and protect you from creditors harassing you (among other benefits), there are differences that mean that they aren’t both viable options for everyone.

It’s therefore important at the start of the process to identify the key differences between the two options.

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Alongside this, there are decision factors that you should pay attention to, including:


  • What effect either option has on your credit.
  • How much you’ll repay each month.
  • What assets are affected.
  • What your responsibilities and duties will be for either option.
  • How long each of the processes takes.


Although filing for bankruptcy is still a popular option, many people across Canada are now turning to a consumer proposal due to the benefits it has over its counterpart.

Of course, at the start of the process, it’s advisable that you meet with a Licensed Insolvency Trustee who will take a look at your finances and recommend which is the most suitable route for you to take.

But to help to guide you initially, here is a brief comparison of the two options:

Consumer Proposal or Bankruptcy: Decision Factors

Consumer Proposal

If you opt for a consumer proposal, your trustee will make an offer directly to your creditors.

Within this offer, it will list the amount that you’ll repay along with a set time of when you’ll do this in.

One huge benefit of this option is that you’ll only repay a portion of what you owe and you are allowed up to 5 years to complete them.

However, although it’s only a portion of what you owe, this tends to be more than if you filed for bankruptcy.

You’ll also have to consider the fact that with this option, you have to have debts under $250,000 and your creditors have up to 45 days to agree or disagree with your proposal.

If they agree to the proposal, you will be able to start to pay off your debts in an affordable way.

There are several other benefits associated with this option, including:


  • You can keep all of your assets.
  • You are able to keep any tax refunds.
  • You can pay off your debt early.
  • You’ll receive a Certificate of Completion if you successfully repay all your debts.
  • Interest charges on repayments will be frozen.
  • Flexibility surrounding payments.
  • It is removed from your credit report 3 years after you’re discharged.



Alternatively, you could opt to file for bankruptcy.

This legal process is considered the ideal choice for those with a high amount of debt.

For this option, you’ll have to give any assets that are considered to be non-exempt to your creditors as part of your repayment plan.

When filing for bankruptcy, unlike a consumer proposal that allows for some flexibility around repayments, the length and the repayment amount are determined by legislation – and is based on the value of your assets and surplus income.

However, when you’ve effectively made all of your repayments (within a minimum of 9 months), your debts will be eliminated.

Here are some of the other typical benefits you can reap from bankruptcy:


  • Wage garnishments are eliminated.
  • Your tax refund will be paid directly into your bankruptcy estate.
  • Debts will be discharged when you complete your assigned duties.
  • Record of bankruptcy is removed within 6 years of your discharge.
  • Not everyone will lose their assets.


Your Duties

Consumer Proposal


  • You can make your repayments.
  • You are able to meet with your creditors if required.
  • You attend two credit counseling sessions.



  • You can make your repayments.
  • You are able to meet with your creditors if required.
  • You attend two credit counseling sessions.
  • You must provide information when you file tax returns.
  • You may have to surrender some of your high-ticket assets.


Find Out More Today

Do you want to find out more about filing for bankruptcy or a consumer proposal?

Then get in contact with one of our local and Licensed Insolvency Trustees today by either calling (877) 879-4770 or through emailing them.

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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