Licensed Insolvency Trustee

When facing serious financial challenges, choosing the right debt relief option is crucial. Two common solutions are bankruptcy and a consumer proposal. While both are designed to provide relief, they differ significantly in process, impact, and benefits. 

Consumer Proposal

A consumer proposal is a legally binding agreement between you and your creditors, facilitated by a licensed insolvency trustee. It allows you to negotiate reduced payments while avoiding the severe consequences associated with bankruptcy. Here are some key highlights of a consumer proposal:

Benefits of a Consumer Proposal

• Debt Relief Without Bankruptcy:

A consumer proposal allows you to manage your debts while avoiding the need to declare bankruptcy. It’s a solution that lets you keep your assets and focus on rebuilding your finances.

• Reduced Debt Payments:

You’ll usually pay back only a portion of what you owe. The repayment terms are negotiated based on what you can reasonably afford, providing immediate financial relief.

• Legal Protection from Creditors:

Once your proposal is filed, creditors are legally required to stop collection actions, wage garnishments, and lawsuits. This can provide much-needed peace of mind.

• Flexible Payment Terms:

You can choose a repayment plan that works for your budget—typically spread out over up to five years. This makes managing monthly payments more feasible.

• Preserve Your Assets:

Unlike bankruptcy, a consumer proposal lets you retain assets like your home, car, or investments.

• Improved Financial Stability:

Successfully completing a consumer proposal can help you rebuild your credit over time and create a fresh financial start.

Bankruptcy

Bankruptcy is a legal process that provides a fresh financial start by erasing most of your debts. 

Key Aspects of Bankruptcy:

• It involves surrendering certain assets to repay creditors. Subject to provincial exemptions. 
• Bankruptcy does have a serious short-term impact on your credit, but it allows you a fresh start to rebuild your credit.
• You may have to make surplus income payments if your earnings exceed government thresholds.

How They Differ: Bankruptcy vs Consumer Proposal

Asset Protection

A consumer debt proposal allows you to retain assets.

Bankruptcy may require you to forfeit assets to cover debts.

Credit Impact

While both options affect your credit, bankruptcy has a more severe and lasting impact.

A debt forgiveness program like a consumer proposal offers a less damaging alternative.

Cost and Repayment Flexibility

Proposals are structured with fixed, negotiable payments under a debt solution program.

Bankruptcy costs can vary based on your income and assets.

Process Length

Bankruptcy filings can conclude in as little as nine months but may extend based on the circumstances. While a consumer proposal will usually be a 5-year plan, you have the option to pay off at any time.

Bankruptcy and Consumer Proposals Are Complex Legal Processes — We’re Here to Help

Navigating debt solutions like bankruptcy or a consumer proposal involves legal, financial, and
procedural complexities that can feel overwhelming. Each situation is unique, and understanding your
rights, responsibilities, and options is essential. That’s why speaking with a Licensed Insolvency Trustee
(LIT) is your best first step. Contact us today

If you’re worried about losing your home, investments, and other valuable assets due to debt, you’re not alone. Many individuals navigating financial challenges share this concern. The good news is that there are debt management options designed to protect what matters most to you while addressing your financial issues. Here’s what you need to know:

Protect Your Assets with a Consumer Proposal

A consumer proposal is often considered a preferable alternative to bankruptcy when it comes to safeguarding your home, car, or other essential assets. The benefits of a consumer proposal include allowing you to reduce your debt without forfeiting your possessions. Here’s how it works:

• During the consumer proposal process, a licensed insolvency trustee near me will help you create a manageable debt proposal to present to your creditors.
• Assets like your home are protected, and creditors are legally barred from taking further action once the proposal is accepted.

This makes consumer proposal one of the best bankruptcy alternatives for homeowners seeking debt relief without sacrificing their property.

How Bankruptcy Affects Your Assets

Unlike a consumer proposal, assets do vest to the LIT in a bankruptcy process.  It may require surrendering certain assets to the LIT to repay creditors. However, exemptions vary by province, and some property, including personal belongings, household goods, vehicle, RRSP and tools of your trade, are protected up to certain values.Your LIT will help you ascertain which assets are vulnerable if any. If keeping your home is your priority, exploring consumer proposal vs bankruptcy can help you decide which route is better for your circumstances.

Bottom line: If you have assets you want to protect, a consumer proposal is usually the safer option—and it still provides legal debt relief. Bankruptcy may still be appropriate in some situations, but we will help you compare both based on your specific circumstances to help you make the best decision for you and your future.

Bankruptcy and Consumer Proposals Are Complex Legal Processes — We’re Here to Help

Navigating debt solutions like bankruptcy or a consumer proposal involves legal, financial, and
procedural complexities that can feel overwhelming. Each situation is unique, and understanding your
rights, responsibilities, and options is essential. That’s why speaking with a Licensed Insolvency Trustee
(LIT) is your best first step. Contact us today

While bankruptcy and consumer proposals can eliminate most unsecured debts, there are some important exceptions. Certain debts are not discharged, meaning you’ll still be responsible for them even after the process is complete.

Here are common examples of debts not released:

• Court-ordered fines and penalties (e.g., traffic tickets, bylaw fines)
• Child support and spousal support
• Debts from fraud or misrepresentation
• Student loans less than 7 years old (from last full-time or part-time attendance)
• Restitution orders
• Certain civil judgments (especially those involving fraud or willful damage)

Confused about which debts apply to you? Speak with a Licensed Insolvency Trustee — we’ll review your situation and explain what’s covered and what’s not, in clear, simple terms.

Every financial situation is unique. When you speak with a Licensed Insolvency Trustee, you’re not getting a generic solution — you’re getting expert guidance tailored to your specific needs.

We’ll take the time to understand your full financial picture and clearly explain your options — whether it’s a Consumer Proposal, Bankruptcy, or another debt relief solution. No pressure, no judgment — just honest, professional advice you can trust.

What You Can Expect:

• A clear explanation of your debt relief options
• Answers to your specific questions — no jargon, no confusion
• Support from a federally regulated professional who’s here to help
• A conversation that’s 100% confidential and commitment-free

Bankruptcy and Consumer Proposals Are Complex Legal Processes — We’re Here to Help

Navigating debt solutions like bankruptcy or a consumer proposal involves legal, financial, and
procedural complexities that can feel overwhelming. Each situation is unique, and understanding your
rights, responsibilities, and options is essential. That’s why speaking with a Licensed Insolvency Trustee
(LIT) is your best first step. Contact us today

Firstly, lets understand the difference in credit score impact between bankruptcy, a consumer proposal, and a debt
management program.

Each debt solution affects your credit differently, but all involve some short-term impact. Here’s a
breakdown:

Bankruptcy: Your credit report shows an R9 rating, the most serious level. This remains on your credit
report for 6 years after discharge (or longer for a second bankruptcy). Your credit score will drop
significantly but can be rebuilt over time.

Consumer Proposal: Starts as an R9 rating while active. Once completed, it is updated to an R7 rating.
It remains on your credit report for 3 years after completion.

Debt Management Program (DMP): Like a consumer proposal, a DMP is reported as an **R9 rating**
while in progress, and then updated to **R7** upon completion. It stays on your credit report for 2
years after you finish the program.

What do “R7” and “R9” mean on a credit report?
R9: This is the lowest credit rating and indicates a serious credit issue such as bankruptcy, a default, or
an active consumer proposal or DMP.
R7: This rating means you have made an alternative arrangement to repay your debt, such as through a
consumer proposal or credit counselling program.

How long does each option stay on my credit report?

Report Option | Initial Rating | Updated Rating after Completion | Removed from Credit Report | 

Bankruptcy: R9 Initial Rating | R9 Completion Rating | Removed 6 years after Discharge

Consumer Proposal: R9 Initial Rating | R7 Completion Rating | Removed 3 years after completion or 6 from filing

Debt Management Program: R9 Initial Rating | R7 After Completion | 2 years after completion

Which option is best for my credit?

There’s no one-size-fits-all answer. While debt management programs may disappear from your credit report
faster, consumer proposals offer legal protection from creditors and often a lower monthly payment. Bankruptcy is best for those with unmanageable debt or no ability to repay. Our Licensed Insolvency Trustees can explain your options clearly and help you choose the right path.

Bankruptcy and Consumer Proposals Are Complex Legal Processes — We’re Here to Help
You’re not alone if you’re worried about how your debt affects your credit. We’re here to provide trusted, judgment-free guidance. Speak with a Licensed Insolvency Trustee today and get a plan tailored to your needs.

Book your free consultation now