The Difference Between A Consumer Proposal And Bankruptcy: Insights From 4 Pillars

As debt consultants, the staff at 4 Pillars works with people in and around Victoria to determine the options available to pay off debt. Only an L.I.T. or Licensed Insolvency Trustee can manage the actual process of bankruptcy or a consumer proposal in Canada.

Sometimes people assume the two are the same thing. In reality, they are very different. A debt consultant from 4 Pillars takes the time to explain the two options and to help people throughout Victoria and the surrounding area to determine which is the best option.

Consumer Proposal

A consumer proposal is a binding agreement between the individual and the creditors that is filed with a Licensed Insolvency Trustee (L.I.T.). It offers a percentage of repayment on the debt, which is typically about thirty cents on the dollar, but this can vary.

The consumer agrees to pay a set amount per month for a maximum of five years. In return for timely and complete payments as set forth in the filing, the creditor agrees to forgive the balance of the debt. There are limits on what types of debts can be included in a consumer proposal.


Bankruptcy is also managed by a Licensed Insolvency Trustee (L.I.T.). Unlike in a consumer proposal, the LIT has the option to sell the asset to repay the creditors based on the limits set forth by the province. Some items are considered exempt assets in a bankruptcy. This is established by the province.

Unlike a consumer proposal, bankruptcy only lasts about nine months, but this can be extended. Understanding your options by talking to a 4 Pillars debt consultant helps you to make the best choice.

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