Personal Bankruptcy: Settle Your Debt Quickly

Are you in debt and your financial difficulties are causing you physical, psychological and emotional suffering? Naturally, you’d like to feel relief, but is bankruptcy or a consumer proposal the best solution for you? Here are our tips.

In short

Consumer proposal
This allows you to repay your debts and/or spread out your repayments over a period of up to five years.

Bankruptcy
In the case of a first bankruptcy, you’ll be freed from your debt after only nine months. All your debts will be discharged and you can start over.

This can be a good solution for those who can no longer live with debt.
However, it significantly impacts your credit since it remains on your credit report for six or seven years after you’re discharged from your debt.

How debt can impact you

Debt can impact you in ways that go far beyond financial issues. It can lead to psychological distress that causes high levels of stress, loneliness, anxiety, guilt and shame. A sense of failure can also affect your physical health.

You might experience muscle tension, digestive issues and extreme fatigue, for example. Debt can also impact your emotional health. You may feel more irritable, anxious or agitated.

If this sounds familiar and you have to choose between bankruptcy and a consumer proposal, you may be unsure which option can quickly address your concerns so you can find peace of mind. In order to help you make an informed choice, we compared these two solutions for you.

Consumer proposal (or proposal to creditors)

A consumer proposal can be a good solution for individuals who are unable to pay off their debts, but want to avoid declaring bankruptcy.

With the help of a licensed insolvency trustee, you must submit a detailed repayment plan to your creditors.
Your payments may be spread out over a period of up to five years.
The plan must be accepted by most of the creditors before it can be implemented.
As long as the proposal is accepted and you meet the conditions, you will avoid bankruptcy.

Filing a consumer proposal will impact your credit rating:

For up to three years after all your debts are repaid;
Or for up to six years after signing the consumer proposal.

However, if you adopt good financial habits, you can improve your credit rating over time.

Furthermore, there are several benefits to filing a consumer proposal. For example:

After filing a consumer proposal, interest stops accumulating;
You will make only one payment per month;
In all cases, you can keep your car and home.

To find out more about consumer proposals, read our article on the topic.

Personal bankruptcy

Bankruptcy is a fast process. In the case of a first bankruptcy, you’ll be automatically discharged from your debt after nine months. If you have surplus income, this will happen after 21 months.

In 90% of cases, bankruptcy eliminates all your debts. This means that you can start over!
Bankruptcy can be a good solution for those who can no longer live with debt and want to be freed from it quickly.

However, compared to a consumer proposal, bankruptcy significantly impacts your credit rating. It remains on your credit report for six or sevenyears after you’re discharged from your debt.

To find out more about bankruptcy, read our article on the topic.

What they have in common

Both consumer proposals and bankruptcy offer protection from your creditors. In both cases, once you’ve filed the paperwork, your creditors will stop harassing you and they must work with your licensed insolvency trustee. Regardless of the choice you make, don’t forget that you can successfully rebuild your credit. This will require effort, but you can rebuild it over time if you adopt sound financial habits.

If you have debt problems and can’t see the light at the end of the tunnel, contact one of our licensed insolvency trustees. They can help to find the best solution for you. The first consultation is free and confidential.