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Managing Debt Through a Consumer Proposal vs. Bankruptcy

In recent years, a consumer proposal has become a popular option taken frequently by individuals struggling with debt instead of filing for bankruptcy. Anyone having great difficulty with their finances will welcome the potential to have an alternate solution available; however, not everyone will be in a position to undertake a consumer proposal. Read about these options below to understand which may be best for you.


Both a consumer proposal and filing for bankruptcy are debt solutions governed by the Bankruptcy and Insolvency Act (BIA) for individuals who are insolvent and unable to pay their debts. Filing for Personal Bankruptcy Filing for bankruptcy is a legal process you voluntarily enter into and must be discharged (or released) from in order to have no further legal responsibility regarding your debts. In order to declare bankruptcy, you must also owe at least $1,000, be unable to make regular monthly payments to your creditors as they become due, and have committed an act of insolvency as defined by the BIA, which includes not paying your bills by the due dates or your assets have become less than what you owe. Here, you must surrender your non-exempt assets, which will be either sold by the Licensed Insolvency Trustee or you may arrange to purchase the trustee’s interest. Depending on your income, you may be required to make monthly payments, known as surplus payments, during the bankruptcy period. You must file monthly income and expense statements and provide tax information to your trustee.

Consumer Proposals To qualify for a consumer proposal, you must be an individual (not a business), and have no more than $250,000 of debt (excluding secured debt such as a mortgage). You must have the ability to repay your debt within a period of no longer than five years. A consumer proposal is quite different from a bankruptcy in that the terms of your debt repayment are proposed to your creditors and approved or rejected. An accepted consumer proposal is a binding contract between you and your unsecured creditors. The proposal is administered by a Licensed Insolvency Trustee “LIT” who is referred to as the Administrator. If the consumer proposal is approved, then you can keep your assets which are not sold as part of the proposal, but you must make set payments to pay your creditors which are decided upfront based on your ability to pay at the time of proposal. Failure to make the agreed payments will result in the annulment of the consumer proposal and may necessitate that you file for bankruptcy and start over. There is also more flexibility to pay your debts early than in a bankruptcy. The consumer proposal must be completed within five years and, upon successful completion, you will be discharged from the debts that were included in the proposal.


The following chart provides some key information about your options, a consumer proposal and bankruptcy.

  • Immediate protection from unsecured creditors? Consumer Proposal and Bankruptcy

  • Loss of non-exempt assets?* Bankruptcy

  • Monthly income & expense statements required? Bankruptcy

  • Monthly payments can fluctuate Bankruptcy

  • Monthly payments are set Consumer Proposal

  • Income tax refund lost? Bankruptcy

  • GST refund lost neither

  • Prepayments possible? Consumer Proposal

  • Deferred payments possible? Consumer Proposal and Bankruptcy

  • Financial limit on the amount owed? Consumer Proposal

  • Acceptance required from unsecured creditors? Consumer Proposal

  • Credit rating affected? Consumer Proposal and Bankruptcy

  • Financial counselling sessions required? Consumer Proposal and Bankruptcy

*In some circumstances, non-exempt assets may be sold as part of the consumer proposal. It is important to meet with a licensed insolvency trustee in Ottawa at D & A MacLeod to learn what option is right for your unique situation. We are committed to helping you start a new beginning™.


The option you select will depend mostly on your present financial circumstances, including your age, employment status, and the size of your debt. If you have a stable income, expect to be working for the next five years, and you are able to afford monthly payments for 36 – 60 months that would not cause undue hardship, then a consumer proposal may be a better option for you.

If you have assets of significant financial value that could be lost in a bankruptcy, you have more reason to opt for a consumer proposal. If you have a high debt load and few or no assets, however, combined with a relatively low monthly earnings, then a bankruptcy may be the best option for you. Speak to a Licensed Insolvency Trustee (LIT) in Ottawa and surrounding areas about your unique situation is recommended.

Learn About Your Options for Bankruptcy & Consumer Proposals in the Ottawa Area

At D & A MacLeod Company Ltd., we would like you to understand your options before making a decision about your future. Our team has over 65 years of experience in helping countless individuals get through financial difficulty. We can assist you in understanding and eliminating uncertainties you may have about whether to pursue consumer proposal in Kingston or Brockville, or if you move forward with a bankruptcy. All of our offices offer consumer proposal and bankruptcy assistance, including Ottawa, Kingston, Brockville, Cornwall, Kanata, Orleans, Pembroke and Smiths Falls. For a free, confidential assessment of your financial situation, contact us to get started online or by calling 613-236-9111. Let us help you on the road to a new beginning™.


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