CONSUMER PROPOSAL VS BANKRUPTCY

Consumer Proposal:

Bankruptcy:

Must be less than $250,000 in debt (excluding mortgage on personal residence) No limit on the size of debt load
Available only to individuals Available to individuals or companies
Settlement offer must be more generous than the creditors would receive in a bankruptcy. Payments based on (a) household income and (b) value of realizable assets
2 mandatory counselling sessions must be attended during the Consumer Proposal (the first within 60 days, the second within 210 days) 2 mandatory counselling sessions must be attended during the Bankruptcy (the first within 60 days, the second within 210 days)
Not Applicable Monthly income and expense statements required.
Tax refunds go to the debtor. Tax refunds for calendar year turned over to creditors.
Not applicable GST refunds turned over to creditors.
Proposal can be 1-5 years. Paying down the proposal earlier is recommended and welcomed. Period of bankruptcy varies depending on first-time or multiple bankruptcies.
If three payments are missed then the Consumer Proposal is considered “annulled” , the protection is immediately lifted and the creditors have the legal right to pursue the amounts owing to them. Bankruptcy payments are required to be completed in full before a discharge is issued by the Trustee
Paying down Proposal earlier is the ideal solution – no penalties, no interest and once completed the debtor’s credit rating can begin to improve. Credit rating rises to R1 three years following completion. Bankruptcy payments can be paid down earlier but normally no early discharge as a result. Credit rating rises to R1 approximately six years following completion.

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