What are the differences between consumer proposal and bankruptcy?

What are the differences between a consumer proposal and bankruptcy? If you’re hesitating between these 2 options and wondering what the differences between bankruptcy and a consumer proposal are, you will want to read this.

What is personal bankruptcy?

Bankruptcy is a right granted to you by the Bankruptcy and Insolvency Act. If you are eligible, having $1000 or more of debts and cannot pay your debts as they become due, you can file for bankruptcy without the approval of your creditors.

If your income is modest, you can reach an agreement with your Licensed insolvency trustee to for a suitable monthly payment during the duration of your bankruptcy.

If your income is higher than the government’s guidelines for surplus income, the law sets the amount you will have to pay. Furthermore, depending on the circumstances, you may or may not be able to keep all the assets you wish to keep and surrender those you no longer want. During your first consultation with the trustee, he or she will be able to confirm these details and you will be able to make an informed decision.

The duration of bankruptcy is generally shorter than a proposal (first-time bankruptcy: 9 or 21 months; second-time bankruptcy: 24 or 36 months). Bankruptcy is mentioned on your credit record for 6 years (Equifax) and 7 years (TransUnion) after its completion which occurs as soon as you obtain the discharge of your debts.

What is a consumer proposal?

On the other hand, a proposal is an agreement that your trustee will negotiate on your behalf to repay your unsecured debts (e.g., credit cards, lines of credit, personal loans, etc.). The amount of your offer will not necessarily correspond to 100% of the amount owed but rather takes into account the value of your assets and a monthly payment you will be able to afford. Interest rates are automatically eliminated and, in the majority of cases, a significant reduction in the amount of debts owed is obtained.

The proposal:

  • Eliminates all interest payable on debts included in the proposal.
  • Ensures that you can retain all the assets you wish to keep and surrender those you no longer want.

Once the proposal is completed, your unsecured debts are discharged. The proposal lasts from 0 to 5 years (you choose the duration based on the amount offered and your financial capacity) and is recorded on your credit record for 3 years after the completion of the proposal.

If your financial situation allows for it, a consumer proposal should always be favored over bankruptcy.


Navigating through the different options can be very confusing. We can help you see things more clearly and guide you towards a debt-free life. Within 24 hours, you will have the answers to your questions and a plan that we will put in place with you.


Personal Finance Advisors and Authorized Insolvency Trustees