A consumer proposal is a legally binding agreement to repay part of what you owe over a term that cannot exceed five years, and you generally keep your assets. Bankruptcy is a separate legal process that can clear eligible debts, but it may involve surrendering certain assets and making surplus-income payments. Both are filed and administered by a Licensed Insolvency Trustee. Neither is universally "better." Which one tends to fit depends on your income, your assets, and what you can realistically repay.
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Both a consumer proposal and a bankruptcy are administered by a Licensed Insolvency Trustee under the federal Bankruptcy and Insolvency Act. Only a Licensed Insolvency Trustee can file or administer either one. DACL assesses your situation and explains your options. We do not file proposals or bankruptcies. Because we administer neither, this comparison is neutral.
| Feature | Consumer proposal | Bankruptcy |
|---|---|---|
| How it works | Repay a portion under a binding agreement | Eligible debts can be cleared through a legal process |
| Who administers it | A Licensed Insolvency Trustee, under the BIA | A Licensed Insolvency Trustee, under the BIA |
| What happens to assets | You generally keep your assets | Certain assets may be surrendered, subject to exemptions |
| Typical duration | Up to five years (60 months max) (Source: OSB) | A first discharge is often 9 months, or 21 months with surplus income (Source: OSB) |
| Surplus-income payments | Not based on surplus income | If surplus income is $200/month or more, you pay 50% of the surplus (Source: OSB) |
| Credit-report impact | Commonly rated R7 | Commonly rated R9, the lowest rating |
| Who it tends to suit | Some income; want to keep assets; can repay a portion | Little income or assets; cannot repay a meaningful portion |
| DACL's role | Assess and refer; not an LIT | Assess and refer; not an LIT |
Every figure reflects current federal rules. A first bankruptcy with no surplus income generally ends in an automatic discharge nine months after filing, or twenty-one months if surplus income applies. (Source: OSB, "Considering bankruptcy.")
DACL is a debt assessment and referral service. We review your situation, explain how a consumer proposal and bankruptcy compare, and refer you to a Licensed Insolvency Trustee when a formal filing is the right fit. We are not a Licensed Insolvency Trustee, we are not a lender, and we are not a government program. Our job is to help you understand both options calmly and point you to the right next step.
We've been helping Canadians since 2009. Here is what people ask most:
A proposal is a legally binding agreement to repay part of what you owe over up to five years, and you generally keep your assets. Bankruptcy is a separate process that can clear eligible debts but may involve surrendering certain assets. Both are administered by a Licensed Insolvency Trustee.
Neither is universally better. It depends on your income, assets, and what you can realistically repay. A free assessment can help you see which one tends to fit.
It depends on the option and your circumstances. In a consumer proposal you generally keep your assets; bankruptcy rules around assets are different. We can explain how each would apply to you.
Both are recorded for set periods that differ between the two. A proposal is removed three years after payoff or six years after signing, whichever is sooner; a first bankruptcy six years after discharge, or seven for TransUnion in some provinces. (Source: FCAC.)
No. Only a Licensed Insolvency Trustee can file or administer either one. DACL assesses your situation, explains your options, and refers you to the right professional.
A short, free, confidential assessment is a calm way to understand both options and find a safe next step. There is no cost and no pressure. You can also compare debt consolidation vs a consumer proposal.
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By Ishank · Debt Education & Content · Debt Advisors Canada
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General information, not legal, financial, or professional advice. Confirm your situation with a licensed professional. Debt Advisors Canada is not a Licensed Insolvency Trustee, a lender, or a government program.