What is the difference between Consumer Proposals and Bankruptcy?

Consumer Proposals vs Bankruptcy

The following chart summarizes many of the similarities and differences between consumer proposals and bankruptcy.

Consumer Proposals

Bankruptcy

What is it?

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%.

Legal declaration of not being able to pay back debts. It is better known as "A fresh start".

What happens to my assets?

You get to keep all of your assets!

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?

Up to 5 years

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?

3 years after you receive your certificate of full performance

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.