Consumer proposal vs bankruptcy in Canada: key differences
Quick summary
A consumer proposal lets you repay part of what you owe over up to five years. A first bankruptcy lasts 9 months, or 21 months if you have extra income. Only a Licensed Insolvency Trustee can file either one. Next step: see how a consumer proposal affects your credit.
Checked November 2, 2026. Main source: Office of the Superintendent of Bankruptcy, Compare debt solutions. Checked November 2, 2026.. See all 2 sources.
Key facts
- Proposal term
- Up to 5 years
- Source: OSB, Consumer proposals, read Nov 3, 2026
- First bankruptcy
- 9 months, or 21 months if you have extra income to pay in
- Source: OSB, Compare debt solutions (modified Nov 26, 2025)
- Who files either one
- A Licensed Insolvency Trustee
- Source: OSB, Compare debt solutions (modified Nov 26, 2025)
Side by side
| Debt management plan | Consumer proposal | Bankruptcy | |
|---|---|---|---|
| Who helps you | A credit counsellor regulated by your province | A Licensed Insolvency Trustee | A Licensed Insolvency Trustee |
| How long it lasts | 1 to 5 years | Up to 5 years | First time: 9 months, or 21 months with extra income. Second time: 24 or 36 months. Third time or more: set by a court |
| What you repay | The full debt, sometimes without interest | A percentage of the debt | Based on the value of your assets and your extra income |
| Your assets | No asset surrender mentioned | You keep your assets if you keep paying secured creditors | Some assets are exempt, such as certain RRSPs and pensions. Other assets go to the trustee |
| How long it shows on your credit report | A payment arrangement shows for 2 years after you finish | 3 years after you finish, or 6 years after you sign, whichever comes first | First time: 6 or 7 years after discharge, depending on the province. Second time or more: 14 years after discharge |
Source: Office of the Superintendent of Bankruptcy, Compare debt solutions. Checked November 2, 2026. Your own timeline and credit report entry can differ, so ask your trustee.
Consumer proposal basics
A consumer proposal is a legal process run by a Licensed Insolvency Trustee. You offer your creditors a percentage of what you owe, more time to pay, or both.
- You can file if your debts are $250,000 or less, not counting a mortgage on your main home.
- The term cannot be longer than five years.
- Once the proposal is filed, wage garnishments and lawsuits against you stop.
- If you miss three monthly payments, the proposal is treated as cancelled and creditors can try to collect again.
- When you finish all payments, you are released from the debts in the proposal and get a certificate of full performance.
Source: Office of the Superintendent of Bankruptcy, Consumer proposals. Checked November 2, 2026.
How to choose
No chart can pick for you. The right option depends on how much you owe, how much you can pay each month and what you own.
A Licensed Insolvency Trustee can explain your options. The official comparison says a trustee may offer a free first meeting, so ask about cost before you agree to anything. Get every fee in writing.
Questions people ask
How long does a consumer proposal last?
The term cannot be longer than five years, according to the Office of the Superintendent of Bankruptcy.
How long does a first bankruptcy last?
9 months if you have no surplus income, or 21 months if you do. A second bankruptcy lasts 24 or 36 months.
Do I keep my assets in a consumer proposal?
Yes, as long as you keep making payments to secured creditors. In bankruptcy, some assets are exempt and others go to the trustee.
Who can file a consumer proposal?
A Licensed Insolvency Trustee files it for you. You can file if your debts are $250,000 or less, not counting a mortgage on your main home.
Try it with your numbers
Does your province have its own rules?
Who licenses collectors, how much of your pay can be taken and which agencies can help are set by each province. Pick yours to see where to look. We remember your choice on this device only.