You’re not alone if you find yourself overwhelmed by debt and unsure of what to do next. Many Canadians in financial distress question whether they should file for bankruptcy or consider a consumer proposal. Understanding the key differences between these two legal debt relief options can help you make an informed decision. Working with a Licensed Insolvency Trustee, like Andrea Orr, can clarify this process and make it less overwhelming.

Bankruptcy vs. Consumer Proposal: What’s the Big Difference?

Both bankruptcy and consumer proposals are formal insolvency processes regulated under Canada’s Bankruptcy and Insolvency Act and administered by Licensed Insolvency Trustees (LITs). However, these two options take very different approaches to debt resolution, impacting your finances, credit, and peace of mind in distinct ways.

1. Debt Forgiveness vs. Debt Repayment

  • Bankruptcy: You may be released from most or all of your unsecured debts, but this often requires surrendering certain non-exempt assets and reporting surplus income.
  • Consumer Proposal: You propose to repay a portion of your debt—typically between 30% to 70%—over a fixed period of up to five years, with no interest and without losing your assets. According to the Office of the Superintendent of Bankruptcy (OSB), consumer proposals have become Canadians’ most common insolvency option, mainly because many prefer the control and structure they provide.

2. Do You Keep Your Assets?

  • In bankruptcy, non-exempt assets (such as investments or second properties) may need to be surrendered to help pay your creditors.
  • In a consumer proposal, you can keep your home, car, and other personal property as long as you stay current with your agreed payments. This is a significant reason many choose a consumer proposal over bankruptcy—especially those who want to protect their hard-earned assets.

3. Monthly Payments and Income Requirements

  • Your income determines bankruptcy payments. Your payments will increase if your income exceeds the government-set “surplus income” threshold.
  • A consumer proposal offers fixed and predictable payments, making budgeting easier. Unlike in bankruptcy, if your income increases in the future, your proposal payments remain the same.

4. Credit Report Impact

  • Bankruptcy typically stays on your credit report for 6 to 7 years after discharge, or even longer if it’s not your first bankruptcy.
  • A consumer proposal is removed from your credit report 3 years after completion, providing a faster path to rebuilding your credit. For many Canadians hoping to qualify for a mortgage or restore their financial standing, a consumer proposal presents a less damaging alternative.

5. Who Qualifies?

  • Bankruptcy has no maximum debt requirement but is usually considered a last resort.
  • Consumer proposals are available to those with total unsecured debts of $250,000 or less (excluding the mortgage on your primary residence).

Why More Canadians Are Choosing Consumer Proposals

Consumer proposals have become Canada’s most common debt solution for several reasons. They allow you to regain control of your finances without the stigma and long-term consequences of bankruptcy. Here’s why so many Canadians—including families, business owners, and working professionals—choose a consumer proposal:

  • You keep your assets.
  • You make one affordable monthly payment.
  • You avoid bankruptcy.
  • You stop interest from accumulating.
  • You receive protection from creditors.
  • Most importantly, you gain peace of mind.

Andrea Orr Can Help You Choose the Right Path

Dealing with debt can be isolating and stressful, but you don’t have to face it alone. Andrea Orr, a Licensed Insolvency Trustee, has helped countless Canadians navigate bankruptcy and consumer proposals with compassion, clarity, and respect. She will work with you to assess your financial situation, explain your legal rights, and help you determine the best solution for your unique needs—without pressure or judgment, just expert support when needed most.

Ready to Talk?

If you’re uncertain whether bankruptcy or a consumer proposal is right for you, the best next step is to get personalized advice from someone who knows the system inside and out.
👉 Book a free, confidential consultation with Andrea Orr today, and take the first step towards financial freedom.