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Consumer Proposal vs Bankruptcy

31 May 2023

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If you’re struggling with debt and are looking for a way to start fresh, you’ve probably found yourself wondering “What is the difference between a consumer proposal and bankruptcy?” The good news? You’re not alone – this is one of the most common questions we get asked.

Let’s be honest, dealing with money troubles can be tough. It’s more than just numbers; it’s about the stress and worry it brings into your life. That’s why we want to make things a bit easier for you, and give you all the information you need to make a decision about consumer proposals and bankruptcy.

Consumer proposals vs bankruptcy – which option is right for me?

Both are options to help you when you’re struggling with debt, but they work differently. The right choice for you depends entirely on your specific situation, but by the end of this blog, you will have the basic information you need to make that choice. Don’t worry if you still have questions though, as we are always on hand to help.

What’s the main difference?

Consumer Proposal

In a consumer proposal you make an agreement with your creditors (the people you owe) to pay a lower percentage of your debt, over a longer period of time. With this extra flexibility, your repayments are more manageable and are based on what you can afford, your assets, income and debt. At the end of the repayment period, the remainder of your debt is written off.


Under a bankruptcy, your assets are used to pay off your debts. There are a few exceptions that protect certain assets, however as this is a more drastic option it is often used as a last resort. Once you file for bankruptcy and meet all of your responsibilities, you are legally released from your debts. 

How do I get started?

Bankruptcy and Consumer Proposals

In both cases, you will work with a Licensed Insolvency Trustee (LIT). These are trained professionals that will support you through the process and make sure you’re choosing the right debt relief option for you. At Harris & Partners, our LITs have helped people find financial freedom all across Canada, offering a judgment-free space to talk openly about their experiences. If you’re ready to take control of your financial situation, get in touch today.

Do I have to give anything up?

Consumer Proposal

Each consumer proposal can come with its own conditions, depending on specific cases. That being said, you can expect to have to stick to a repayment plan, sending regular payments to your LIT, who will pass it onto your creditors on your behalf. Depending on which province you’re based in, you may also have to attend financial counseling sessions.


In Canada, there are a number of assets that are exempt from bankruptcy. These include:

  • Essential personal belongings
  • Retirement savings
  • Government benefits
  • Some types of property (e.g. land or vehicles)
  • Certain types of debt (e.g. student loans, child support and alimony payments)

The specific exemptions depend on which province you live in, so make sure you double check with a LIT in your area. Any assets that are not exempt will have to be turned over to a LIT, who will then use them to pay off your debt.

How much of my debt will I have to pay back?

Consumer Proposal

Generally, you will have to pay back a percentage of your debt under a consumer proposal. One of our Licensed Insolvency Trustees will take the time to fully understand your financial and personal situation. They will then develop a repayment plan and pitch to your creditors only once you are happy with the plan. The repayment amount will depend on what you can afford and what your creditors are willing to accept.


The amount you contribute depends on the worth of your assets and your capacity to make additional income payments. That’s why the amount is different for each individual. Once the process is completed, most of your debts will be discharged, except for certain types specified by law. A Licensed Insolvency Trustee (LIT) can clarify which debts will or won’t be cleared through this procedure.

Is there a cost?

Bankruptcy and Consumer Proposals

There is a cost to filing a bankruptcy or consumer proposal. The fees will be taken from the payment you make to your LIT – whether that’s the scheduled payments under a consumer proposal or the money collected from your assets in a bankruptcy.

We offer a free, no-obligation consultation. So to find out more about how fees work and to get honest, straightforward advice on debt relief, give our team of professionals a call today.

How will it help me?

Bankruptcy and Consumer Proposals

In both cases of bankruptcy and consumer proposals, creditors will have to stop their collection actions. This means no phone calls, lawsuits or garnishments that attempt to take your salary or wages.

At the end of each process, as long as you meet all the payment requirements and conditions, you will be legally cleared of your debts, giving you a fresh start.

Do I have to give up my credit cards?

Consumer Proposals

Any credit cards you have with a balance will be canceled as part of your debt repayment plan under a consumer proposal. If you have credit cards with no balance at the time of filing, you won’t have to hand these over.


Under a bankruptcy, you will have to hand over any credit cards registered to you, with or without a balance, to your LIT.

Is there an impact on my income?

Consumer Proposals

Under a consumer proposal, you are responsible for managing your income and keeping on top of repayments to your Licensed Insolvency Trustee.


After your assets have been used to repay your debts, depending on your income, you may have to make monthly payments to your LIT. These are known as Surplus Income Payments and will take into consideration your personal circumstances.

What happens if I miss payments or don’t fulfill my obligations?

Consumer Proposals

Your consumer proposal could be canceled if:

  • You miss three payments when paying monthly.
  • Your last payment is overdue by more than three months if you pay less often.
  • The court can cancel it for any missed obligations, even just one missed payment.

If it’s canceled, creditors can start collecting what you owe them, unless a court brings back your consumer proposal or lets you file a new one. Sometimes, a canceled consumer proposal might restart on its own under specific conditions.


If you don’t meet the requirements of your bankruptcy, you could face consequences from the court. These can include:

  • Delayed or denied discharge
  • Additional payments to your creditors

How long does it take?

Consumer Proposals

Consumer proposals can take anywhere up to 5 years to complete.


The timelines for bankruptcy depend on a few factors:

  • Your first bankruptcy will last 9 months without surplus income payments, unless there’s an objection to your discharge.
  • If you have surplus income payments in your first bankruptcy, it extends to 21 months, unless someone objects.
  • A second bankruptcy without surplus income payments takes 24 months, unless there’s an objection.
  • With surplus income payments, a second bankruptcy lasts 36 months, again, unless objected.
  • For a third or subsequent bankruptcy, there’s no set discharge time. The court will decide the terms.

Regain Financial Control With Harris & Partners

Dealing with debt can be tough, but you’re not alone. If you’re feeling stuck or confused about consumer proposals, bankruptcy, or just need help with your debts, we’re here for you.

Our team at Harris & Partners is full of friendly professionals who really know their stuff. They’ll listen to you, understand your situation, and give you honest advice. We’re all about finding a solution that fits just right for you.

Don’t let the weight of financial uncertainty hold you back. Reach out to us at Harris & Partners for a guiding hand. Together we can get you on your way to financial freedom.

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