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Consumer Proposal vs Bankruptcy

A Comparison Of Consumer Proposal vs Bankruptcy Options

The choice of which insolvency process to go with can be confusing. But once you review our bankruptcy vs consumer proposal comparison chart (below) you’ll quickly see the differences between the two:

Consumer Proposal

Bankruptcy

Must be less than $250,000 in debt (excluding mortgage on personal residence). No limit on the size of the debt.
Available only to individuals. Available to individuals or companies.
Protection is immediate, once filed electronically with the Federal Government. Creditors are notified within 5 business days. Protection is immediate, once filed electronically with the Federal Government. Creditors are notified within 5 business days.
Once filed, creditors have 45 days to vote for or against the proposal or put forward a counter-offer. If approved by the majority of creditors the Consumer Proposal gains court approval 15 days later. Once filed, creditors cannot stop the process. No voting is required. A creditor can request an examination of the Bankrupt under certain circumstances.
Meeting of Creditors is called if 25% in value (or more) of creditors request one. A meeting of creditors will be held within 21 days after being called. A meeting of Creditors is very rare. Only called in extraneous circumstances.
The settlement offer must be more generous than the creditors would receive in a Bankruptcy. Payments based on (a) household income and (b) value of realizable assets.
Surplus income is only calculated at the time the paperwork is signed. Once the Consumer Proposal is filed, surplus income is no longer an issue. Surplus income is tracked throughout the bankruptcy. If excess Surplus Income occurs, then 50% must be contributed to the estate during the Bankruptcy.
2 mandatory counseling sessions must be attended during the Consumer Proposal. The first within 60 days, the second within 210 days. 2 mandatory counseling sessions must be attended during the Consumer Proposal. The first within 60 days, the second within 210 days.
Not Applicable. Monthly income statements are required.
Tax refunds go to the debtor. Tax refunds for the calendar year are turned over to creditors.
Not applicable. GST refunds are turned over to the creditors.
A Consumer Proposal can last 1-5 years. Paying down the Consumer Proposal earlier is recommended and welcomed. Second-time bankrupts, and those with surplus income, have a lengthier Bankruptcy period.
If three payments are missed then the Consumer Proposal is considered annulled. The protection is immediately lifted and the creditors have the legal right to pursue the amounts owing to them. Bankruptcy payments are required to be completed in full before the Insolvency Trustee issues a discharge.
Paying down a Consumer Proposal earlier is the ideal solution – no penalties, no interest and once completed the debtor’s credit rating can begin to improve. Credit rating rises to R1 three years following completion.

Bankruptcy payments can be paid down earlier but normally no early discharge as a result. Credit rating rises to R1 approximately six years following completion.

While this bankruptcy vs consumer proposal comparison chart highlights some of the similarities and differences between Consumer Proposal or Bankruptcy, this is only a starting point. For anyone dealing with crushing debt, harassing phone calls and letters from collection agencies, or even a wage garnishment, meeting with one of our Licensed Insolvency Trustees is the best way to ensure you have all the facts, so you can make an informed decision about how best to deal with your debts.

Fill out this form to request a free debt relief consultation, so we can provide you with the help you need to clear up that debt once and for all:


Consumer Proposal vs Bankruptcy: Which One Is Better?


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