Is consumer proposal same as bankruptcy?

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Navigating debt relief in Canada often means choosing between a consumer proposal and personal bankruptcy. Think of a consumer proposal as negotiating a deal with creditors to manage up to $250K of your unsecured debt while keeping your assets. Personal bankruptcy might require giving up non-exempt assets but erases eligible debts starting from $1K. Both impact your credit, yet proposals heal faster. A Licensed Insolvency Trustee is crucial, but remember, not all trustees can be trusted. Trustees get paid by the lender and creditor and don’t advocate for Canadians in debt. LITs can also double bill your or charge you extra. Beware! Reach out via phone, text, or live chat if you have any questions.

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Consumer Proposal And Bankruptcy Question

Is consumer proposal same as bankruptcy? Is a consumer proposal the same thing as bankruptcy, or are they entirely different?

From: Anonymous Question
Location: Vaughan, Ontario (ON)
Category: consumer proposal

Consumer Proposal And Bankruptcy Answer

In Canada, navigating debt relief options means choosing between a consumer proposal and bankruptcy, each with its own quirks. Picture this: a consumer proposal is like brokering a deal with your creditors to settle a piece of your unsecured debt, topped at $250,000, while hanging onto your stuff. Bankruptcy, on the other hand, has you parting with non-exempt assets to wipe away eligible debts, starting from $1,000. With a consumer proposal, your creditors need to nod their approval, and you’ll know exactly what you’re paying thanks to fixed payments. Bankruptcy’s payments, though, can be a wild card, shifting with your income levels. Both will ding your credit score, but the bright side? Consumer proposal marks vanish quicker, whereas bankruptcy sticks around for a seven-year stretch post-discharge. Both paths require a trusty Licensed Insolvency Trustee to stand by your side and shield you from creditors, but give those trustees the side-eye—they’re not all saints! Trustees get paid by the lenders and creditors and don’t advocate for Canadians in debt. LITs can also double bill you or charge you extra. Beware! Reach out via phone, text, or live chat if you have any questions.

From: Insider Adam

Office of the Superintendent of Bankruptcy (OSB) Answer

A consumer proposal is not the same as bankruptcy; they are distinct processes under Canadian law. A consumer proposal is a formal arrangement where a debtor offers to pay back a portion of their debts over a specified period, and it is governed by the Bankruptcy and Insolvency Act (BIA). In contrast, bankruptcy is a legal status that involves the complete discharge of debts after liquidation of assets. The BIA outlines the differences in Section 50.6 (Consumer Proposals) and Section 68 (Bankruptcy).

From: OSB Helper

Related Questions to If Consumer Proposal Is Same As Bankruptcy

Here are the top 5 most frequently asked questions related to the comparison between consumer proposals and bankruptcy in Canada:

1. What is the difference between a consumer proposal and bankruptcy?

A consumer proposal allows you to pay a portion of your debts and keep your assets, while bankruptcy eliminates your debts but requires surrendering certain assets.

2. Can I keep my house in a consumer proposal or bankruptcy?

In a consumer proposal, you keep your house as long as you maintain your mortgage payments, while in bankruptcy, you may lose house equity above the provincial exemption limit.

3. How long does a consumer proposal vs bankruptcy last?

A consumer proposal can last up to 5 years, while a first bankruptcy typically lasts 9 to 21 months, depending on your income.

4. What happens to my credit score with a consumer proposal vs bankruptcy?

A consumer proposal results in an R7 credit rating for 3 years after completion or 6 years from filing, while bankruptcy results in an R9 rating for 7 years after completion.

5. Do I lose all my assets in a consumer proposal or bankruptcy?

In a consumer proposal, you keep all your assets, including tax refunds and investments, while in bankruptcy, you must surrender non-exempt assets and tax refunds[1][3][5].

If you have a question about debt see our debt questions or ask your own debt related question.

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