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Consumer Proposals vs Bankruptcy
The following chart summarizes many of the similarities and differences between consumer proposals and bankruptcy.
What is it?
Consumer Proposals
Settlement with your creditors to pay back a portion of your debt, interest free, over a 5 year period. You can reduce your debt by up to 80%.
Bankruptcy
Legal declaration of not being able to pay back debts. It is better known as “A fresh start”.
What happens to my assets?
Consumer Proposals
You get to keep all of your assets!
Bankruptcy
Your assets will revert to your Licensed Insolvency Trustee, with the exception of exempt assets under Canadian law. Your LIT will liquidate your assets in order to pay your creditors.
What debts are included?
The same debts are included in a consumer proposal and a bankruptcy. Common examples include:
- Credit Card
- CRA Income tax debt
- Student loans *
- Line of Credit
- Unsecured Loans
- Payday Loans
How long is the process?
Consumer Proposals
Up to 5 years
Bankruptcy
First time bankruptcy – 9 months to 21 months
Second time bankruptcy – 24 months to 36 months
How long will it show on my credit report?
Consumer Proposals
3 years after you receive your certificate of full performance
Bankruptcy
First time bankruptcy – 7 years after you receive your discharge
Second time bankruptcy – 12 years after you receive your discharge
* Student loans are only included if you have been out of school for 7 years on the date you filed bankruptcy or consumer proposal.