Many people are surprised to learn that in Canada they have an alternative to consolidation loans as well as personal bankruptcy. Consumer Proposals are a legislated debt settlement option and hugely popular alternative debt solution to personal bankruptcy.

Interest in Consumer Proposals as a debt consolidation tool has been increasing for a number of years, and in BC more people are now choosing to settle debt using a Consumer Proposal instead of filing personal bankruptcy.

Consumer Proposals are typically structured as monthly payments over a set period and can drastically cut the amount of debt you must pay to consider your debts paid in full – reductions of up to 80% are possible. The flexibility of a Consumer Proposal means there is a range of consolidated debt settlement terms that you can offer creditors to streamline debt payments and reduce the strain of debt on your household finances, without bankruptcy.

Although Consumer Proposals may be outpacing bankruptcy in sheer number of filings, personal bankruptcy may still be the best option for debt management in situations where a person is facing a large amount of debt with relatively little income or no ability to make even a modest payment towards their debt.

In all cases it is best to connect directly with a Licensed Insolvency Trustee to discuss your specific circumstances and needs before making any final decisions. Navigating consumer debt situations can be complex and not all solutions are created equal.

You can connect confidentially with a Sands & Associates representative to explore your debt options, including Consumer Proposals and personal bankruptcy. Consultations are free and without obligation. No referral is required.

What’s the Difference Between a Consumer Proposal and Bankruptcy?

While both Consumer Proposals and bankruptcy are debt management options only available by working with a Licensed Insolvency Trustee, they are two distinctly different processes.


Consumer Proposal
VS. Personal Bankruptcy

It's important to understand the solutions available to you so you can make an informed decision and get a debt-free plan that's right for you and your unique situation.

Compare some of the main differences between Consumer Proposals and bankruptcy here.

Consumer Proposal
Personal Bankruptcy
How Much Debt Repaid?

Total amount of debt generally reduced;
reductions of 70-80% are common.

Interest is automatically frozen by law on all debts.

Income levels and family size taken into account.

No amounts are repaid to the creditors in nearly 80% of bankruptcies; there is no set repayment of debts.

Interest is automatically frozen by law on all debts.

Payments are based on income and assets that may not be exempt; monthly payments are often for administration costs only.

Administration Costs

All administration costs are included in the payment amount offered to creditors – no additional fees are charged.

Federal government-regulated tariff is used to set fees.

Minimum monthly payments are usually $200 per month for 9 months.

Federal government-regulated tariff is used to set fees.

Length of Time

Must be completed within 60 months; terms of 24-48 months are typical.

May be paid in full early at no penalty.

Will last either 9 or 21 months if it is a first-time bankruptcy, depending on income.

Impact on Credit Rating

An R7 rating will be noted for 3 years after completion, or 6 years from the date of filing, whichever comes first.

An R9 credit rating will be noted for 6 years following discharge, although with proper credit rebuilding steps it is still possible to obtain credit during this time.

Creditor Agreement and Collections

All creditors are bound by the terms and share in payments if 50% of voting creditors accept the Consumer Proposal.

The ONLY method in Canada for reducing debts with Canada Revenue Agency.

Only a Licensed Insolvency Trustee can cease a wage garnishment, asset seizure and other collection action.

Contact from creditors must cease upon filing.

Creditors cannot prevent you filing for personal bankruptcy.

Debts owing to Canada Revenue Agency can be extinguished.

Only a Licensed Insolvency Trustee can cease a wage garnishment, asset seizure and other collection action.

Contact from creditors must cease upon filing.

Advisor's Qualifications

Only a Licensed Insolvency Trustee can file a Consumer Proposal on your behalf.

Licensed Insolvency Trustees are licensed by the federal government.

Must comply with Code of Ethics and rules of professional conduct.

Overseen by the Office of the Superintendent of Bankruptcy.

Licensed Insolvency Trustees are licensed by the federal government.

Must comply with Code of Ethics and rules of professional conduct.


DOWNLOAD THE INFOGRAPHIC

Top