Consumer Proposals vs Personal Bankruptcy

Consumer Proposal vs Personal Bankruptcy

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Bankruptcy vs Consumer Proposal – Which is Better?

When considering Consumer Proposal vs Bankruptcy, keep in mind that everyone’s situation is different – and only a discussion with a Licensed Insolvency Trustee (who will review your current financial situation in detail) will be able to help answer this question for your specific circumstances. Bankruptcy is the last resort and most severe debt removal option – and should not be entered into before all other options have been explored.

Consumer Proposals and Personal Bankruptcies fall under the Bankruptcy and Insolvency Act (the “BIA”). Each can only be filed by a Licensed Insolvency Trustee (such as David Sklar & Associates Inc.). The goals of both are to:

  • Offer relief to ‘honest but unfortunate debtors’ and enable them to get on with their lives;
  • Stop collection efforts and legal actions (including wage garnishment);
  • Stop interest;
  • Release the debtor from their debt load; and
  • Offer training to avoid future debt problems.
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With a Consumer Proposal

The debtor is normally able to keep all of their assets including their homes and cars. However, they must continue to make secure loan payments that may exist for those assets. In other words, your mortgage and car payments won’t be affected by debt relief. A Consumer Proposal provides relief for unsecured debt such as credit card debt, lines of credit, payday loans, and similar types of debt.

Through a Licensed Insolvency Trustee (previously known as a Bankruptcy Trustee), the debtor makes an agreement with their current unsecured creditors to pay off a portion of the outstanding unsecured debt over a set period of time (cannot be longer than 5 years). Once the debtor has honored the agreement, they are released from the outstanding unsecured debts. The agreed-upon monthly payment is calculated based on the amount of the debt, equity in any assets, and the debtor’s income and expenses.

It’s important to remember that a Consumer Proposal is a proposal to creditors. The majority of creditors must find the proposal fair. If the majority agrees, all unsecured creditors are bound by the agreement.

The Licensed Insolvency Trustee is responsible for collecting monthly Consumer Proposal payments and distributing these funds to the creditors in accordance with the BIA.

A Consumer Proposal is a smart decision for debtors with significant assets such as a house, car, vacation or income properties, valuable art, non-RRSP investments, and who have a stable income. For more information about Consumer Proposals, call David Sklar & Associates and talk to a Bankruptcy Trustee.

With a Personal Bankruptcy

The debtor is allowed to keep some assets, but may be required to release major assets such as homes, which are in turn settled by the Bankruptcy Trustee with the proceeds distributed to the creditors. If the debtor has what is calculated to be Surplus Income, they will have to pay a portion of their income into their Bankruptcy Estate over a period of 21 months (for first-time bankrupts). Surplus Income is calculated based on the total income of your family, the size of your family and a standardized guideline set by the Government each year.

There are some important assets that are exempt from Bankruptcy proceedings, though many have limits to their value. These exemptions include some equity in your principal residence, some equity in your personal vehicle, tools of the trade, furniture and appliances, clothing, pension plans, and RRSP investments (except contributions made in the 12 months before filing for Bankruptcy), and certain types of life insurance policies.

When considering Bankruptcy vs Consumer Proposal, keep in mind there are situations where individuals may be eligible to file Bankruptcy but ‘other factors’ motivate them to file a Consumer Proposal. For example:

  • the person works in a profession that does not allow Bankruptcy;
  • the stigma of Bankruptcy is totally unacceptable to the debtor;
  • there are assets that the debtor is not willing to give up; or
  • going into Bankruptcy may force a spouse into Bankruptcy as well.

If none of these situations apply to you, Bankruptcy proceedings may make more sense than a Consumer Proposal if you do not have significant assets like a home, vacation or income properties, or non-RRSP investments or your income is not sufficient to afford a proposal.

Whatever your situation, it is essential to review your unique case with a Bankruptcy Trustee. The team at David Sklar & Associates will go through your finances and discuss the options that make the most sense for you. A Bankruptcy Trustee will help you make the right decision for your financial future.

There are other important differences between Consumer Proposals vs Bankruptcy including:


If during the Consumer Proposal process the debtor unexpectedly earns or receives money or assets over the amount declared in their proposal – the terms of their proposal agreement does not change.

If during Bankruptcy, the bankrupt unexpectedly earns or receives money or assets over the amount declared in their Bankruptcy – then the amount they are required to pay into their Bankruptcy may increase and the length of time they spend in Bankruptcy may also be increased.


Where a job application form asks if a person has ever declared Bankruptcy (usually where an employee needs to be bonded) anyone who has declared Bankruptcy must answer yes. Bankruptcy may hurt your chances of being bonded which may impact whether or not you are hired.

A Consumer Proposal is not considered the same as a Bankruptcy on application forms which is an important factor to remember when considering and comparing whether to proceed with a Bankruptcy vs Consumer Proposal.

Professions for which being bonded is commonly a requirement include repair technicians, cleaners, accountants, bookkeepers, financial officers, bank tellers and more. Any profession where you handle money or have access to valuables, whether it’s in someone’s home or through handling cash transactions, often requires bonding.


Bankruptcy stays on your credit report for 6 years after the discharge date, or 7 years after the date filed without a discharge date. If a second bankruptcy is filed, then the first re-appears on your Equifax credit report, and both bankruptcies remain for 14 years after the discharge dates.

A consumer proposal will be removed from your credit report 3 years after you’ve paid off all the debts according to the proposal, or 6 years from the date it was filed, whichever comes first


In addition to helping individual consumers with Bankruptcy and Consumer Proposals, David Sklar & Associates also provides debt relief services to businesses and corporations. The goal of the Division I Proposal process is to keep small to mid-sized companies running as they make debt payments.

Corporate Bankruptcy and Proposal Services include an analysis of current debt, identifying possible solutions and their ramifications, creating and filing Division I Proposals, developing restructuring tracking, and negotiating debt and interest concessions with a company’s creditors.


There are significant differences when comparing Bankruptcy vs Consumer Proposal. Determining which is your best option can only be done with the assistance of a Licensed Insolvency Trustee. If you live in the Greater Toronto Area, are contemplating filing a Consumer Proposal or Bankruptcy, and would like to speak with a Trustee – call David Sklar & Associates Inc. at 416-498-9200 to book a free initial consultation.

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Take Your First Step Towards A Debt Free Life

If you are overwhelmed by debt and live in the Toronto area, call us at 416-498-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you. 

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Jerry is a very patient person, he answered all my questions and made this experience so smooth and easy for me. I was not sure what to expect but dealing with him made me feel so much better. He sure knows what he is doing and how to put people at ease for sure (should have done this long ago). I recommend him to anyone I am so glad I had him on my side and now to do my part. Thanks Jerry ur greatPattie
Patty Murphy
21:34 18 May 22
Rhoda Lewis helped me achieve a fresh start two and half years ago! She was very professional with a very warm, caring personality! I emailed her today with a question and she responded quickly. She's great at her chosen profession!!
Debbie Livingston
01:24 11 May 22
Nothing but good things to say about Jackie. She was so nice and so understand and everything was so quick and easy. In a matter of a week, there was the solution that I never thought was possible. Thank you so very much for everything that you have done. ❤️❤️❤️
Cassandra Keenan
21:05 10 May 22
I was in a lot of debt and stress, Jackie Stanley with David Sklar & Associates was very professional, and extremely helpful with getting out of debt. I should of did this sooner, they take the all the weight and stress of a persons shoulders, amazing team at David Sklar & Associates!!
Hubert Z
03:08 10 May 22
Jackie helped me out during a really tough time and she made the entire process very easy and painless. I highly recommend reaching out to her if you find yourself in any financial trouble. You won’t be disappointed!
prettylush 13
02:42 10 May 22
I had a good experience with Jackie. Making appointment to see her was easy and follow up was great. I appreciated the detailed information she gave and the clear explanation of the options I had. While I landed on this company without anyone's recommendation, I will be happy to recommend their services to those who need them.
Kipyego arap Serem
19:00 09 May 22
Jackie has been really helpful with my issues. She is approachable and friendly and I recommend her to anyone trying to access her services.
Ankita Sisodia
18:51 09 May 22
The service that was provided to me from Trina at David Sklar and Associates was nothing but superb! I was referred to them through family, and Trina was nothing but understanding and so so so helpful! Every part of the process was smooth and efficient and she explained everything to me so I would be able to understand the process. Can’t believe the weight that has been lifted off my shoulders. Thank you so so much Trina!
Christina Ivany
15:52 07 May 22
I’m so glad that I spoke to Rhoda. I was nervous having to claim bankruptcy, but Rhoda is very resourceful and has a wonderful way of putting you at ease. I felt like I was speaking to my best friend. Rhoda from the bottom of my heart thank you for your help and kindness it goes along way. Linda Bennett
Linda Bennett
15:29 06 May 22
I was absolutely terrified of admitting I needed help and was in a tough position where my best option was to file for bankruptcy. As someone with severe anxiety it was one of the hardest calls I had to make but once I spoke with Trina at David Sklar she immediately made me feel at ease and like I was in good hands. I mostly dealt with Trina and Eva who were so kind and communicative throughout the whole process and made it as painless as possible.I did briefly speak with a couple of other associates from time to time and they were also equally as lovely. The reviews for this company obviously say a lot about these guys and it rings true. I’m not someone who usually writes lengthy reviews but I am happy to recommend David Sklar and associates for anything. Thank you guys for always treating your clients like human beings and always being available for questions or concerns.
Emma Higgins
19:14 02 May 22