Consumer Proposal vs Bankruptcy: Which is better?

by Joel Sandwith on November 21, 2011

The answer to this question will tend to be different for you depending on your situation.  In many cases, we find that our clients can afford to repay a portion of their debt, so a consumer proposal is the perfect option for them.  For some, however, even partial payments could be difficult, making a personal bankruptcy the best way to a fresh start.

Here are some differences between the two:

Payment amount: In a consumer proposal, your payment will be steady and predictable, with an option to pay more quickly (and be done sooner!) if you can.  With a personal bankruptcy, the cost could be low, but could go much higher if your income improves, or if you have any assets which could be seizable.

Credit Rating:  The credit rating in bankruptcy is R9, which is essentially the worst possible.  In a consumer proposal, the rating is R7, a higher rating. In fairness, it’s not a LOT higher, but it is noticeable.

Here’s a great video of Doug Hoyes discussing some different examples of consumer proposals:

Tax refunds:  In a consumer proposal you keep any income tax refunds you are entitled to.  In a personal bankruptcy you lose your personal income tax refund for the year in which you file, plus for any previous unfiled years.

Assets:  In a consumer proposal the idea, simply, is to make a payment to the creditors and keep your assets.  Not all assets can be protected in a bankruptcy.

Reporting:  Once a consumer proposal is filed, there is no further reporting required of your income, or any other changes in your finances.  In a personal bankruptcy, until you are discharged, you will have to report your monthly income and expenses and any new assets you acquire.

For more information on the differences between these two options, also have a look at this website:
http://www.hoyes.com/learn-bankruptcy-consumer-proposals.htm

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{ 4 comments… read them below or add one }

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semon davis October 22, 2015 at 7:35 am

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