Debt Management Solution for Toronto Residents: Bankruptcy vs. Consumer Proposal
If you have more debts than you can handle, you need a plan. You need to come up with a debt management solution that can work for you. The plan may be to reduce your expenses and pay off your debts yourself – in other words, you could use budgeting to regain the control of your financial situation; Or, your plan may involve getting a debt consolidation loan, for example. But, at the end, If none of the other options work, either a personal bankruptcy or consumer proposal may be necessary. Once you realize this, you need to decide which of these two is the correct choice in your situation. To help you with this decision we have created a chart showing the advantages and disadvantages of both consumer proposals and bankruptcy.
This table, of course, presents only general information. Your situation is unique, so for more information please call us from anywhere in Toronto at 310-PLAN (no area code required), or email our bankruptcy trustee in Toronto – either to ask more questions or to set up a no-charge and no-obligation initial consultation.
The Pros and Cons of Personal Bankruptcy and Consumer Proposals
| Issue | Pro | Con |
| Proactive vs. Reactive | Proposal: in a proposal, an individual makes an offer to pay a reasonable amount which has been reviewed and recommended by the trustee administering the proposal; the individual retains control of their assets | Bankruptcy: in a bankruptcy, the trustee, creditors and the courts can all have a say on how much the bankruptcy will end up costing the bankrupt; all non-exempt assets must be turned over to the trustee upon filing |
| Personal satisfaction of dealing with creditors and debt | Proposal: individual will feel better about trying to pay their creditors as much as possible | Bankruptcy: bankrupt does not have resources to pay creditors (or does not want to pay creditors) |
| Credit Report | Proposal: treated as an R7 and stays on your credit report for 3 years after proposal competed | Bankruptcy: treated as an R9 and stays on your credit report for 7 years (14 if it is a second time bankruptcy) |
| Total amount paid to creditors | Bankruptcy: amount paid by bankrupt to creditors will likely be less and over a shorter period of time, 9 to 21 months | Proposal: amount paid to by debtor to creditors MUST be more than a bankruptcy and will run for no less than 24 months but no more than 60 months |
| Discharge issues, i.e., gambling, previous bankruptcy | Proposal: individual avoids the bankruptcy process and having to appear in court for a discharge hearing | Bankruptcy: bankrupt has to attend in court and Registrar (like a judge) will decide what conditions will be attached to the bankrupt’s discharge |
| Professional status / job implications | Proposal: some professions (i.e. lawyers and accountants) and jobs (i.e., bank tellers) prohibit a bankrupt from working; a proposal is NOT a bankruptcy | Bankruptcy: some professions / jobs prohibit a bankrupt from working |
| Secured Creditors | Proposal: secured creditor will likely allow individual to continue making payments under the secured arrangement (i.e., car loan) | Bankruptcy: some secured creditors act immediately on their security, even if payments are not in arrears |
If you are still not sure as to which path to take, and would like more information on debt management solutions available to you, please call our Toronto office for a free initial consultation. Our bankruptcy experts in Toronto will explain you each of your options, including bankruptcy and consumer proposal, and recommend the one that can work best in your specific situation.
