Personal bankruptcy is a solution to debt under the Canadian Bankruptcy and Insolvency Act. It allows you to clear almost all your debt, such as income taxes, credit cards, overdue utility bills, lines of credit, and loans. Bankruptcy may be the best course of action once you’ve reviewed all other options for dealing with your debt.

In Canada, only Licensed Insolvency Trustees (trustee) can administer bankruptcies. Your trustee will walk you through all aspects of filing for bankruptcy, including legally protecting you from collection attempts and garnishments, and becoming the go-between for you and your creditors.

Bankruptcy clears nearly all debt, with some exceptions. For example, spousal support, debt with unemployment or social assistance, traffic tickets, fraud, etc. must be repaid. A discharge from bankruptcy also releases you from your obligation to repay your student loans if you filed for bankruptcy at least seven years after the date you ceased to be a part- or full-time student.

A consumer proposal will stop all debt collection calls within five days of filing. Similarly, filing for bankruptcy shields you from collection calls and any legal actions collectors pursue against you.

While both bankruptcy and consumer proposals offer a means to alleviate your debt, they differ in terms of assets you can keep, repayment structure, duration, filing process, and impact on your credit rating.

A consumer proposal is great for those who can afford payments to creditors but need a modified arrangement and/or have equity in assets to protect and want a lesser impact on their credit rating. On the other hand, bankruptcy can eliminate overwhelming debt for people struggling to meet their financial obligations in as little as nine months. You can learn what each option will look like, given your specific situation, during a free, no-judgment consultation with one of our debt solutions professionals.