Confused about your options? We break down the key differences between Canada's two most common debt relief solutions to help you decide which is right for you.
Two Paths to Freedom
When you are drowning in debt, the terminology can be overwhelming. In Canada, the two primary federally regulated options are Consumer Proposals and Personal Bankruptcy. Both offer legal protection from creditors, but they work very differently.
What is a Consumer Proposal?
Think of this as a "deal" with your creditors. You offer to pay back a portion of what you owe (often 20-30%) over a period of up to 5 years.
- Assets: You keep your assets (house, car, investments).
- Cost: Fixed monthly payment you can afford.
- Surplus Income: Your payments don't go up if you earn more money.
- Best For: People with steady income who want to protect assets like a home.
What is Personal Bankruptcy?
Bankruptcy is a process of surrendering assets to eliminate debt. It is typically faster but more restrictive.
- Assets: You may have to surrender non-exempt assets (luxury cars, investments, second properties).
- Cost: Payments vary based on your income.
- Surplus Income: If you earn more, you pay more.
- Best For: People with low income and few assets.
Key Comparison Table
| Feature | Consumer Proposal | Bankruptcy |
|---|---|---|
| Assets | You keep them | May be seized |
| Monthly Cost | Fixed | Variable (based on income) |
| Duration | Up to 5 years | 9 or 21 months |
| Credit Impact | R7 rating for 3 years after completion | R9 rating for 6 years after discharge |
Which is Right for You?
If you have equity in your home or a good income, a Consumer Proposal is almost always the better choice. If your income is low and you have no significant assets, Bankruptcy might be the faster, cheaper route to a fresh start.