An insolvency trustee can explain the ins and outs of both to you, and in fact must do so by law when you approach them looking for debt relief.Both give you immediate relief from your creditors. They are different ways of solving the same problem. One is not necessarily cheaper than the other, and in fact if you are filing a consumer proposal, the trustee must be satisfied you are offering at least as much $$ as the creditors would get if you filed a personal bankruptcy. I have worked with thousands of Canadians who sought relief under the Bankruptcy Act, and I will tell you here, in general layman’s terms, what the main differences are which I have seen: Once your consumer proposal is approved in court, the terms will not change. You will know exactly where you stand. As long as you do not miss three payments, you will be left alone.
But if you file a personal bankruptcy, you are never on certain ground. If your financial circumstances improve while bankrupt, it could mean you must pay more $$ than you first thought, in order to be discharged.
Filing a personal bankruptcy means you will be reporting to the trustee each month for at least nine months - filing an income and expense report. And if your net income exceeds certain threshold guidelines, the law requires you pay half the surplus to the trustee.
Best case scenario, a personal bankruptcy lasts nine months, but for many people it is twenty one months, depending on their reported net income.
Only three years after you complete your consumer proposal, it will fall off your credit report. Or six years after you first filed, whichever comes first.
A bankruptcy will stay on your personal credit report six years after you are discharged.
When you file a bankruptcy, the trustee will file your tax returns on your behalf and direct refunds etc. to your creditors. But when you file a consumer proposal, they are not involved at all.
Overall, a consumer proposal is less invasive than a personal bankruptcy and also gives you a chance to rebuild and restore your personal credit and good name much faster than a bankruptcy does.