Difference Between a Consumer Proposal & Bankruptcy Pt 2

Both filing a consumer proposal and a bankruptcy has the same goal in mind. It allows unfortunate but honest debtors a way to pay back their debts with dignity. It should be helpful to know that in either insolvency case a bankruptcy isn’t typically posted in the newspapers anymore. With more and more people turning online for news sources these days the same stigma will has been lessened.

In this 2nd blog I’ve already mentioned some of the differences between a bankruptcy & a consumer proposal. If you haven’t read the first part yet click here.

Here are 4 additional differences between the two types of insolvency files


  • In addition to paying the retainer (cost for administration & processing fees). You’ll need to prove that you’re insolvent. Insolvent meaning unable to reasonable pay your debts. If you have approximately $5000.00 to $250000.00 of unsecured debt (excluding mortgage debt), & you have the ability to repay a portion of your debt that’s the first part.
  • Secondly your creditors must agree to your proposal or bankruptcy payment terms.
    If your creditors disagree then your terms will need to be renegotiated again. It is absolutely critical to have a good insolvency company at your side so that you don’t need to pay anymore than you need to. For more info click here

Process of Both:

  • A Consumer Proposal is greatly less complicated than a bankruptcy. You’ll need to have things such as a new bank account, pay stubs, proof of ownership of your assets, etc. The proposal is submitted to your creditors they have 45 days to agree to the terms and conditions.
  • In a bankruptcy the volume of mandatory documents and the level of legal complexity is high. Your trustee will require that you will need to submit monthly bank statements.

financial recovery period:

  • When your proposal is approved by your creditors you are on your way to a financial recovery. The terms of the proposal are legal and binding and as such, you can move on. If you have an income increase, sell an asset, get a bonus or tax refund then that revenue is yours to keep. You will never be required to pay more to your proposal even if your income should increase.
  • In a bankruptcy while you’re in the payment process everything that you earn, sell, or receive as money (like if you won the lottery) will go towards payment of your bankruptcy. Your bankruptcy payment period, for the 1st, is 9-21 months and 24-36 for a 2 + bankruptcy.

Credit Rating:

  • A consumer proposal is treated as an R7. This means that you’ve made a special arrangement with your creditors for repayment. This lasts for 3 years after receiving your certificate of discharge.
  • A bankruptcy is treated as an R9. This has the same rating as a bad debt, collections debt, written off debt, etc. The bankruptcy rating will remain for 6 years after receiving your certificate of discharge.

One major thing to keep in mind, your credit rating may be already low because because of missed payments and collection processes. By acting now you’ll mend your finances and fully rehabilitate your future.


Bankruptcy vs Consumer Proposal pt1
Future debt counselor

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