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benefit of proposal vs bankcruptcy

A consumer proposal can extend up to 5 years and appear on a credit report for up to 3 years after that. A bankruptcy can be discharged in less time and be on a report for up to 6-7 years BUT you can start to rebuild credit immediately.
It seems to me the proposal requires one to pay longer (possibly more) with potentially a longer time horizon during which it can hurt one`s credit worthiness.
That all said, how can a proposal be more beneficial than a bankruptcy? I`m struggling to see clearly on this. Thank you for any information you can provide.

Posted from: Ontario

One Response to “benefit of proposal vs bankcruptcy”

Barton Goth – Goth & Company Inc. -Trustee in Bankruptcy said...

The biggest benefit of a consumer proposal over a bankruptcy is long term.

What happens with a bankruptcy is that even once the R9 is off your credit bureau (whether this is the maximum of 6 years from discharge or sooner) it ends up haunting you more long term. The challenge it presents is that every time you apply for credit the lending institutions typically ask if you have ever previously filed for bankruptcy. Now of course you would have to answer this yes, even if it is off of your credit report, and the result is the bank will now hold you to a higher qualification standard than others.

If we contrast that to the filing of a consumer proposals, the bank never asks that question, they could but they don’t. As a result with a consumer proposals, once you have re-established your credit it is truly re-established and doesn’t impact future lending institutions decisions.