Bankruptcy vs Consumer Proposals

What is the best solution to resolve your debt problems in Ontario?

Bankruptcy and consumer proposals are the top 2 debt relief options available in Ontario. While both will resolve your debts and provide legal protection from creditors, there are differences between them. Find out exactly what these differences are below.

TopicsConsumer ProposalPersonal Bankruptcy
Who can claim?You must have the ability to repay a portion of your debts. A proposal must be accepted by your creditors by simple majority.Any person, who owes more than $1,000 in debt, is eligible to file a personal bankruptcy in Canada. Ideal candidates are those who need rapid financial relief and the ratio between debts and income is too great.
Debt limitMust be less than $250,000 in debt (excluding a mortgage on the personal residence). If more than this, a DIV1 Proposal would apply.There is no limit on the size of debt load.
PaymentsOnce your creditors agree to a proposal amount, your monthly payment is fixed and it will remain the same until your proposal is completed. You can pay sooner if you want with no penalty.Monthly payments vary as they are based on your household income using the surplus income calculation. The more you earn, the more you will be required to pay.
AssetsYou will not lose any assets and you are not required to surrender anything, unless you want to make them part of your repayment.In order to be absolved of your debts you are required to surrender certain assets, or make an arrangement to pay them off to be able to keep them.
Credit RatingYou will receive an R7 credit rating, which indicates that you have made a settlement with your creditors and it will stay as R7 for three years after making your last payment. This is not a good credit rating, but it is better than a bankruptcy R9.You will receive an R9 credit rating, which is the worst rating you can have. Depending on your circumstances, it will remain on your credit report for 6 years for a first time bankrupt.
Monthly ReportingThere are no monthly tasks or reporting required.You are required to complete a monthly budget for all income and expenses and you must supply copies of your pay stubs to your trustee.
TaxesYou are entitled to all future tax refunds and/or credits that you are owed.You will lose any tax refunds for the year that you file your bankruptcy and for any previous years that you have not filed.