Comparison: Consumer Proposal vs. Bankruptcy and FAQ
Comparison of
Consumer Proposal vs. Bankruptcy and FAQ
Choosing a debt relief solution can be difficult, especially with all of the options available to you. Below, we have prepared a table comparing the differences between consumer proposal and bankruptcy, as well as a table summarizing the similarities between each.
Differences Between Consumer Proposal and Bankruptcy
| Consumer Proposal | Bankruptcy | |
| Who is eligible to file ? |
An insolvent person with total debt not greater than $250,000 (excluding the mortgage on your home). | An insolvent person with unsecured debt of at least $1,000. There is no upper limit on the amount of the debt. |
| What happens to my assets under each scenario ? | You keep all of your assets. | You may keep many of the most important assets to you including your vehicle, your furniture and your clothing (subject to certain limits). Other assets are provided to the trustee, who will sell them for the benefit of your creditors. |
| What about my income going forward ? | You keep all of your income throughout your consumer proposal. There is no need to report your income to the trustee during a proposal. You must, however, make the payments under the proposal. | Your income must be reported monthly to the trustee and if your income is above a certain threshold, you must pay a percentage of that income to the trustee throughout your bankruptcy. |
| Is creditor approval required ? | Not necessarily. Your creditors have 45 days after the proposal has been filed to indicate their approval or rejection. If they do not respond to the trustee, the proposal is considered to have been approved by them. | No. Bankruptcy is your option and can be filed by you whether or not your creditors approve of it. |
| How long is the process ? | As short as 60 days, or a maximum of 60 months. The length of the proposal is determined by you and your ability to make payments. | Generally a minimum of 9 months and a maximum 36 months, depending on the number of previous bankruptcies and the requirement to make payments to the trustee (discussed above). |
| How will my credit rating be affected ? | A notation will appear on your credit report generally for 3 years following the completion of all payments under your proposal. | A first-time bankruptcy filing will generally remain on your credit report for 6 to 7 years following the date of the completion of your bankruptcy; a second-time filing will remain for approximately 14 years. |
| Can I finish the process early ? | Often proposals allow you to pay off the entire amount and complete the proposal early. | Generally not. You usually remain bankrupt for the entire bankruptcy period. |
| Can I borrow money once I have made a filing ? | Yes. There are no restrictions on borrowing money after you have filed a proposal. | Yes – however, if you are borrowing $1,000 or more, you must advise the lender of your bankruptcy. |
| Will my professional accreditation be affected ? | You may often practice your profession without any impediments. | Certain professions restrict the ability of bankrupt individuals to fully practice their profession. |
| May I sponsor my family for immigration into Canada ? | Yes – a proposal will not affect your ability to sponsor your family. | No – you may not sponsor your family until your bankruptcy is completed. |
Similarities Between Consumer Proposal and Bankruptcy
| Consumer Proposal | Bankruptcy | |
| What happens to legal action, garnishments and collection calls ? | All actions against you generally stop with the filing of either a consumer proposal or bankruptcy. | |
| Am I required to attend counselling sessions ? | Filers of both bankruptcies and consumer proposals must attend two counselling sessions before the completion of the bankruptcy or consumer proposal. | |
| Can a credit counsellor file my bankruptcy or consumer proposal ? |
Only a federally-licensed Insolvency Trustee can file a bankruptcy or a consumer proposal for you. | |
| How is the trustee paid ? | The trustee is generally paid based on the amounts paid by you under your proposal, or on any assets received by the trustee in a bankruptcy. There is often no requirement to make any additional payment to the trustee. | |
| Can my employer fire me if I file bankruptcy or a consumer proposal ? | No. Your employer cannot fire you because you’ve filed either a bankruptcy or a consumer proposal. | |
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