The Office of the Superintendent of Bankruptcy in recent years reported a significant decrease in bankruptcy filings due to a steady increase in consumer proposal submissions as recently. As 2015 almost 50% of all insolvency instances where in fact filed as consumer proposals.
 

A greater awareness within the consumer market around potential new solutions, when having to deal with their financial woes, has led to an increase in questions around the benefits of consumer proposal versus bankruptcy.

As each situation is unique it is imperative that one recognizes that one size fits all does not always apply in today’s complex financial world. The days of taking the drastic action of declaring bankruptcy and recognizing that this is a serious solution one avoid bankruptcy as the repercussions affect your financial record for six years, and if this is your second filing up to 14 years.
 

9 Reasons why a consumer proposal filing could be better than bankruptcy:
 

1.    Creditor Protection: A consumer proposal inevitably protects you from creditors. Trustee files your proposal with all your creditors, your personal assets cannot be seized and wages, if they are being garnished, will stop. With bankruptcy, it does result in your assets being seized based on your allowable exceptions. One must note that each province has specific exceptions.
 

2.    The process: of a Proposal: Notwithstanding the inherent costs around bankruptcy, a consumer proposal is less complicated and easier to navigate and complete. The level of legal complexity and mandatory documentation along with a depth of regulations is higher in bankruptcy. Thus, the less restrictive consumer proposal allows for the administration through a License Insolvency Trustee. Upon submitting a proposal to your creditors, they have 45 days to accept or decline the conditions. The creditors may request a meeting and amendments can be made to your initial proposal. This again must be done with your insolvency trustee.
 

3.    Credit Rating: is if you are questioning the difference between a consumer proposal and bankruptcy quite often the reality is your credit rating is already negatively affected and in some cases because of lack of payment and collections quite close to zero. There is however a difference with regards to time that bankruptcy versus consumer proposal remains on your credit bureau score. Upon paying the agreed upon terms of a consumer proposal the credit bureau keeps a record for three years, however, with bankruptcy, it remains there for six years.
 

4.    Assets: the number one reason why most Canadians of which file for a consumer proposal relates to their individual assets. One gets to keep all their assets most significant is your home. Most households, families, couples will avoid any solution as best as possible that may result in one losing their home.
 

5.    Avoid Bankruptcy: the stigma of bankruptcy for most individuals is something one avoids to their best ability. For some consumers, it can be more critical as it may adversely affect their business, legal requirements and professional designation.
 

6.    Instant Financial Improvement: Once a consumer proposal is approved by your creditors the terms of the proposal are legal and binding and you can move on to financial recovery. If you acquire a new job and your salary increases, sell any of your assets, tax refund, or an annual bonus, that revenue is yours to keep. You will never be asked or required to pay more money.
 

7.    Cost: the only costs associated with a consumer proposal are your fees to your License Insolvency Trustee who completes and submits the filing in its entirety and in addition ensures payment to your creditors to repay your debt. There are no filing fees, administration fees, consulting fees paid independently.
 

8.    Qualification: In in order to qualify and be a candidate for a consumer proposal and you are unable to pay your debts and you find that you have unsecured debt greater than $1000 and less than $250,000 (this will exclude your mortgage debt) if you have the ability to repay a portion of your debt, and your creditors agree to your proposal, you are a strong candidate for a consumer proposal.
 

9.    Manageable Payments: If you have a consistent and reliable income source you will qualify for a consumer proposal. There are no predefined standards that dictate how much one pays. Each scenario is unique and will usually relate back to a percentage of your unsecured debt.