Consumer Proposal vs Bankruptcy


Have you ever wondered about the differences between a bankruptcy vs. consumer proposal? You aren’t alone! We are here to debunk some myths and set the record straight on these two types of debt processes.

A consumer proposal is a legally binding process that allows an individual to be assisted by a proposal trustee. With a consumer proposal, the trustee will work with you to develop a proposal that allows you to offer a plan to pay creditors a percentage of what is owed to them. All payments to your creditors are made through the trustee, and this allows the individual to extend the time that they have to pay off their debts, which can be up to five years.

A bankruptcy is another type of legally binding process that involves a trustee. Trustees are appointed by the Office of the Superintendent of Bankruptcy (OSB) and help individuals through the bankruptcy process. In a bankruptcy, a trustee deals directly with your creditors for you. All payments to your creditors are made by the trustee, who also sells your assets.

Your creditors are notified, and there are financial counselling sessions and payments required to complete the process. Once all steps in the process have been completed, you will be discharged from bankruptcy in as little as six months. A discharge means that you are no longer legally obligated to repay the debts you had on the date you filed for bankruptcy. The timing of a discharge depends on several factors and is set on an individual basis.

Differences between Consumer Proposals and Bankruptcy

There are several differences between a consumer proposal and filing for bankruptcy:

1. A consumer proposal can be a much longer process that can last up to five years. It is a longer process to pay off far more debts; however, you are able to keep your assets (such as your home).

2. A bankruptcy is a much quicker process and can be discharged in as little as six months. However, your assets, including items such as your home, are sold to pay off creditors.

Both a consumer proposal and a bankruptcy are legal processes recognized by the credit bureaus.

Myth: Debt Management Companies will help solve your Debt Concerns

Beware of debt management and debt counselling services that advertise the ability to manage your creditors on your behalf.

This is not a consolidation loan, and these companies are not recognized by all of your creditors. These firms are not administered by a trustee and you may be missing some crucial legal advice and expertise. It can take years to dissolve with a debt management company, and opting out is extremely difficult.

Do not hesitate to contact us with any questions. Our credit specialists are here to help borrowers in Langley, Surrey, and throughout Greater Vancouver and British Columbia!