A comparison of consumer proposals and bankruptcy

Proposals vs. Bankruptcy

How does a High Home Value Affect your Consumer Proposal?

Consumer proposals have become the preferred method for dealing with debt in Canada, yet there are still a lot of misconceptions regarding them. One commonly held belief is that if you own a home, you can’t file a proposal. In fact, for most people who own a home, a proposal is the better solution for dealing with debt. A key difference between consumer proposals and bankruptcy is how both proceedings deal with assets. In bankruptcy, all…

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Do Banks Like Consumer Proposals?

To understand how creditors, like your bank, view a consumer proposal, it’s important to understand exactly what a consumer proposal is and how it affects the money you owe them. Here’s the quick version: A consumer proposal is a federally regulated process to settle your debts for less than what you owe.  It will not change secured debts like a mortgage or car loan.  If you want to keep your house or car, you have…

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Avoid the Surplus Income Penalty with a Consumer Proposal

In a bankruptcy the amount of money you are required to pay is based on your income. Each month you are required to provide your trustee with copies of your pay stubs and proof of any other income. If you earn money above a certain threshold, you will be required to pay more into your bankruptcy. This is a government rule and it is called surplus income. In many regards it is a penalty because the more…

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Infographic – Consumer Proposal vs Bankruptcy

One of the most common questions we receive is “Am I better off filing a Bankruptcy or a Consumer Proposal? The chart below will help you to see some of the key differences in each scenario as a bankruptcy and consumer proposal go head to head on some of the most frequently asked questions: The table above is provided to give you a guide – the specifics of your situation should be discussed with a…

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I Filed Bankruptcy once Before, Should I Think about a Consumer Proposal Now?

If you’ve had financial difficulty in the past, and filed bankruptcy, it may not be a great option to file bankruptcy again. We’ll explain how the costs of a repeat bankruptcy may mean a consumer proposal may be the wiser choice. A second bankruptcy is a more difficult and expensive process.  The fees in a second bankruptcy alone can amount to several thousand dollars, and you will be in the process for at least two,…

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Will my Credit Rating be Better in a Consumer Proposal?

The answer is:  sort of.  This is a bit of a sticky point.  In a consumer proposal you are repaying a portion of your debt, voluntarily, and this should have some positive impact on your score, versus a bankruptcy. In practice, in all honesty, it’s not a huge difference. If you file a personal bankruptcy, it should remain on your credit report as an R9 (worst possible rating) for seven years after your discharge.  For…

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Will my Monthly Proposal Payments be Lower than in a Bankruptcy?

When I meet with people in our Vaughan office, I help them evaluate their options. In many cases, they are surprised to find that based on their budget it is more affordable to opt for a consumer proposal rather than a bankruptcy. This is because your monthly payments are often lower in a consumer proposal. For example, I met with Linda (not her real name) in April. Linda was in her fifties and did not…

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Consumer proposal: better than bankruptcy if your income will increase

This article is the first in a series that will help you answer the question: “What’s better for me: a consumer proposal, or personal bankruptcy in Canada?” Of course the answer will be different for everyone, but it’s important to consider the differences between the two types of procedures.  One of the most significant differences is in income reporting. If you file bankruptcy in Canada, you are required to report your income to the trustee…

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