Is a consumer proposal treated as bankruptcy?

Question: I’ve heard that a consumer proposal is another form of bankruptcy. Would it be treated as such on credit applications where it often asks “have you ever filed for bankruptcy?” Would I need to say yes? Anything else to be concerned about?

Alternative To Bankruptcy

No, a consumer proposal is not bankruptcy; it’s an alternative to bankruptcy.  If you file a consumer proposal and are asked if you ever filed bankruptcy, the answer is “no”.

The confusion occurs because both consumer proposals and bankruptcy are governed by the Bankruptcy & Insolvency Act, and bankruptcy trustees are licensed to assist with both procedures.

Credit Implications

A consumer proposal will appear on your credit report; you will receive an R7 rating for three years after your proposal is completed.  A bankruptcy remains on your credit report for 6 years after you are discharged, and you receive an R9 rating, so they are different procedures, with different implications.

There are many advantages to filing a consumer proposal over bankruptcy but the best solution always depends on each persons individual situation. That is we we suggest you contact a trustee for a free consultation to review your options.

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