Review your options to find the debt restructuring plan that is right for you to become debt free.

Consumer Proposal vs Bankruptcy

It is important to understand and compare all of the financial restructuring options that are available to you. You want to select the option that is right for you to receive the greatest financial benefit available in the shortest period of time possible.


The two most common financial restructuring plans available in Canada are a Consumer Proposal and a Personal Bankruptcy. There are similarities and differences between the two options. Although both options provide immediate protection against any further collection action by your unsecured creditors, it is important to carefully consider both options as one option may provide substantially greater financial or other benefits in a shorter period of time than the other option depending on your current financial situation.


We have prepared the following comparative analysis to assist you in understanding the key similarities and differences between a Personal Bankruptcy and a Consumer Proposal.

Consumer Proposal - Yes

Immediately upon electronically filing (e-filing) your signed Consumer Proposal documents with the Office of the Superintendent of Bankruptcy (Federal Government), you receive protection against any further action by your unsecured creditors. All legal proceedings including wage garnishments and asset seizures are terminated. The Trustee must send notice of your Consumer Proposal to all your creditors within 5 business days following the Consumer Proposal filing date.

However, the protection you receive from your unsecured creditors ends if the unsecured creditors refuse to accept your Consumer Proposal and the rights of your unsecured creditors to pursue you for the recovery of your debt is reinstated.

Personal Bankruptcy - Yes

Immediately upon electronically filing (e-filing) your signed Personal Bankruptcy documents with the Office of the Superintendent of Bankruptcy (Federal Government), you receive protection against any further action by your unsecured creditors. All legal proceedings including wage garnishments and asset seizures are terminated. The Trustee must send notice of your Personal Bankruptcy to all your creditors within 5 business days following the bankruptcy filing date.

Consumer Proposal - Yes

Within forty-five (45) days following the filing of your Consumer Proposal, the unsecured creditors vote to accept or refuse your Consumer Proposal. Once your Consumer Proposal is accepted by the required majority of your unsecured creditors, Court approval follows within fifteen (15) days.

If within forty-five (45) days following the filing of your Consumer Proposal twenty-five percent (25%) or more in dollar value of your proven unsecured creditors refuse to accept your Consumer Proposal, a Meeting of Creditors will be held to further consider your Consumer Proposal. If a majority of your unsecured creditors refuse to accept your Consumer Proposal at the Meeting of Creditors, the Consumer Proposal process comes to an end. The rights of your unsecured creditors are reinstated and they will reconvene collection action against you for the recovery of the debt. If your unsecured creditors refuse to accept your Consumer Proposal, you will be required to explore other debt restructuring plans and a Personal Bankruptcy may be your only remaining option.

Personal Bankruptcy - No

There is no voting process or other form of approval required from your unsecured creditors for your Personal Bankruptcy to be accepted, valid and enforceable. Your unsecured creditors are unable to ignore, refuse, stop or “opt out of” the Personal Bankruptcy process. The decision to file a Personal Bankruptcy is your decision and your decision alone. There is no Court approval process to file a Personal Bankruptcy.

Consumer Proposal - Yes

To qualify for a Consumer Proposal, the amount you owe must not exceed $250,000, excluding the mortgage balance owing on your principle residence. If your debts exceed $250,000, you may want to consider a Division I Proposal which has no limitations on the amount you owe.

Personal Bankruptcy - No

There is no limitation on the total amount you owe to qualify for a Personal Bankruptcy.

Consumer Proposal - No

A Meeting of Creditors occurs when twenty-five percent (25%) or more in dollar value of proven unsecured creditors request a Meeting of Creditors or refuse to accept the Consumer Proposal within forty-five (45) days following the filing of the Consumer Proposal.

Personal Bankruptcy - No

A Meeting of Creditors in bankruptcy proceedings are uncommon. Meetings occur only when the value of the non-exempt assets in a bankruptcy exceeds $15,000 or where the unsecured creditors or the Official Receiver request a Meeting of Creditors.

Consumer Proposal - No

Your payments remain the same throughout the length of your Consumer Proposal regardless of whether your income increases or decreases. An increase or decrease in your income has no influence on your monthly payments.

Personal Bankruptcy - Yes

You are required to pay your surplus income to your Trustee during the length of your bankruptcy. If your income increases during your bankruptcy, your surplus income payments increase. Conversely, if your income decreases during your bankruptcy, your surplus income payments decrease.

Consumer Proposal - Yes

The length of a Consumer Proposal ranges from a minimum of sixty (60) days where a lump sum payment is provided as a settlement to your unsecured creditors to a maximum period of five (5) years where monthly payments are provided as a settlement to your unsecured creditors.

The payments in a Consumer Proposal may be prepaid at any time without penalty. Payment in full brings the Consumer Proposal process to an immediate end.

Personal Bankruptcy - No

The amount you are required to pay in a Personal Bankruptcy may be prepaid at any time, however prepayment will not bring the bankruptcy process to an end or reduce the length of your bankruptcy.

For a first-time bankrupt with no surplus income the length of the bankruptcy is nine (9) months and for a first-time bankrupt with surplus income the length of the bankruptcy is twenty-one (21) months.

For a second-time bankrupt with no surplus income the length of the bankruptcy is twenty-four (24) months and for a second-time bankrupt with surplus income the length of the bankruptcy is thirty-six (36) months.

Consumer Proposal - Yes

If three (3) payments are missed during the term of your Consumer Proposal, you risk having your Consumer Proposal “annulled”, which means it is brought to an end. In certain circumstances, the Proposal Administrator may have the ability to waive the payment arrears and extend the length of your Consumer Proposal. However, the extension provided by the Proposal Administrator may not extend beyond five (5) years from the filing date of the Consumer Proposal.

Alternatively, where your financial circumstances have changed and you can no longer afford to make the payments you originally offered in your Consumer Proposal, you can file an Amended Consumer Proposal. A vote by your unsecured creditors to accept or reject your Amended Consumer Proposal is required.

Deferring payments in a Consumer Proposal is possible, but not recommended. Whenever a default in the payment terms occurs, there is a risk that the Consumer Proposal process will be terminated and the rights of your unsecured creditors will be reinstated.

Personal Bankruptcy - Yes

You may make monthly payments of an amount less than the monthly surplus income payment required under the Superintendent’s Standard. You may also defer your monthly surplus income payments from time to time during the length of the bankruptcy. Monthly payment reductions and deferrals will extend the length of your bankruptcy. You will not receive a discharge from bankruptcy until all surplus income payments have been paid in full.

Consumer Proposal - Yes

You are required to attend two (2) financial counselling sessions. The first counselling session must be completed within sixty (60) days following the date of your Consumer Proposal. The second counselling session must be completed within two hundred ten (210) days following the date of your Consumer Proposal. We perform all counselling sessions on a one-on-one basis. We do not perform group counselling sessions.

Personal Bankruptcy - Yes

You are required to attend two (2) financial counselling sessions. The first counselling session must be completed within sixty (60) days following the date of your bankruptcy. The second counselling session must be completed within two hundred ten (210) days following the date of your bankruptcy. We perform all counselling sessions one-on-one. We do not perform group counselling sessions.

Consumer Proposal - No

There is no requirement to complete or submit monthly Income and Expense statements or provide documentation to verify income.

Personal Bankruptcy - Yes

You are required to complete and submit to your Trustee monthly Income and Expense statements disclosing the net monthly income of the family unit and the monthly living expenses of the family unit. You must provide documentation to verify the monthly income earned, however there is no requirement for you to provide documentation to verify your monthly living expenses.

Consumer Proposal - No

There is no requirement for you to surrender your income tax refunds to your Trustee for the benefit of your creditors. You will continue to receive your income tax refund for the year in which you file your Consumer Proposal and all future years during the length of your Consumer Proposal.

Personal Bankruptcy - Yes

Income tax refunds for the year in which you declare bankruptcy are surrendered to your Trustee for the general benefit of your unsecured creditors. Future years income tax refunds are unaffected regardless of the length of your bankruptcy.

Consumer Proposal - No

Your GST refunds will continue to be remitted directly to you by the Canada Revenue Agency throughout the length of your Consumer Proposal.

Personal Bankruptcy - No

Your GST refunds will be remitted to your Trustee by the Canada Revenue Agency during the length of your bankruptcy. Once you are discharged from bankruptcy, your Trustee will forward to you all the GST refunds the Trustee received during your bankruptcy. In certain circumstances where you default in the performance of your duties, the Trustee may retain your GST refunds for the general benefit of your creditors.

Consumer Proposal - No

There is no requirement to surrender non-exempt assets or repurchase non-exempt assets. Generally, in a Consumer Proposal you retain possession of all your assets.

Personal Bankruptcy - Yes

Non-exempt asset(s) must be surrendered to your Trustee or you may repurchase the non-exempt asset(s) from your Trustee during the bankruptcy usually for an amount equivalent to the auction value of the non-exempt asset(s).

When you elect to repurchase the non-exempt assets from your Trustee you will be required to pay for the non-exempt assets in full prior to being eligible to receive a discharge from bankruptcy.

Consumer Proposal - Yes

You will receive an R7 credit rating when you file a Consumer Proposal. The R7 rating will remain on your credit report for three (3) years from the date you complete the Consumer Proposal and receive your Certificate of Full Performance.

Personal Bankruptcy - Yes

You will receive an R9 credit rating when you file a Personal Bankruptcy. This is the lowest rating. The R9 rating will remain on your credit report for six (6) years following the date of your discharge from bankruptcy or fourteen years (14) where you have multiple bankruptcies.

An R9 rating is also assigned if you have a bad debt, your debt has been assigned to a collection agency or you have moved without providing the creditor with a forwarding address.

Consumer Proposal - Yes

There is no restriction in being a director of a corporation when you file a Consumer Proposal.

Personal Bankruptcy - No

The federal and provincial corporation acts prohibit a bankrupt from being a director of a corporation. When you file a Personal Bankruptcy, you must resign as director of a corporation when filing bankruptcy.

Consumer Proposal - No

There is no requirement for you to disclose the status of your being in bankruptcy when you enter into a business transaction.

Personal Bankruptcy - Yes

If you enter into a business transaction, either as a consumer or by operating a business as a sole proprietor, you are required to disclose the status of your being in bankruptcy.

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