Consumer Proposal, Bankruptcy, Debt Settlement, or Consolidation. What do I do?

If you Google anything to do with debt, you will find one of these "helps" available and worded as such; Debt Settlement, Debt Relief, Debt Consolidation, Consumer Proposal or Bankruptcy. They are sound very scary and daunting...and they should. Pick the wrong one with no exit strategy and you will wish had kept your debts.

Consumer Proposal Kiki Berg

From my own personal experience, I can tell you that finding a professional that doesn't just "bandaid" your today, but takes a long term, practical, financial approach to your next 5 years is difficult. Companies may have a solution, but many lack followup in ensuring once you done your debt relief program that you are setup for success. As a mortgage broker, I see this all to often.

Everyone is unique in their situation. A bankruptcy for one person might be better than a consumer proposal. Getting a 2nd mortgage, might just be hiding a deeper spending issue. Debt relief might cost you more in the long term.

I have been through a consumer proposal 12 years ago and assisted a family member in a bankruptcy. I did alot of research and asking questions before I made my decision. So yes, I can speak to this personally.

Remember, your credit is screwed regardless of which program you end up with. Why you need credit and when... should be your bigger question. The choice is ultimately yours.

Here are the 4 main "debt helper" programs

There is a variety of debt helper programs in Canada available today. About 50 companies offer different types of debt helper programs and it is very difficult to find a company that offers genuine guidance for people heavily burdened by debt. The four main types of debt helper programs in Canada are:

Debt settlement programs/counselling:

These programs (Debt Relief) aims to help you reach a negotiated agreement between you and your creditors to decrease the amount of debt you must repay. Every creditor must be contacted individually to reach settlement in separate agreements.

Debt settlement company "does not make regularly scheduled payments on the Client's behalf to creditors." In a typical debt settlement plan you are required to accumulate a lump sum of money, which is then used for the settlement. It's expected that it will take 36 months, or three years, for the client to accumulate enough money that the creditors are likely to accept the settlement. So you have a huge mess sitting on your credit for 3 years before it says "settled".

  • There is NO guarantee that the creditors will accept your proposal in the future, does not prevent them calling you, garnishments, lawsuites and you could be paying into your own savings account for years before the debt settlement companies make the offer; hence putting you years behind getting that "fresh start), accruing interest with no guarantees. So really putting the "onus" on you to save the money first to offer the creditors with hopes they accept.

  • CRA won't accept debt settlements for less than the full amount owing, but they will accept consumer proposals for less than the full amount owing.

  • In BC Debt Settlements companies are not regulated or licensed trustees...and can charge hefty upfront fees regardless if you complete it or not.

  • Your credit is going to register as R7's for along time, and if your looking for a mortgage in the future it will be at least TWO years from settlement paid off until you can qualify. Mortgage lenders view debt settlement and consumer proposals in the same way.

Consumer Proposal:

This program tries to negotiate with a majority of the creditors to accept a partial repayment of the debts you owe them. In accordance with the Bankruptcy and Insolvency Act, if a majority of the creditors on the proposal accept the agreement, then the other remaining creditors will are bound to accept this offer.

  • The repayment of debt is calculated based on your income and assets.

  • You don't lose your house (depending on equity)

  • Fees are regulated and built INTO your proposal, so no upfront fees required.

  • Your credit is an R7 - same as Debt Settlement companies

  • You have a fixed payment for 3-5 years starting right away.

  • You can pay it off when ever you like.

  • Can include CRA debts

  • Secured loans against vehicles. Sometimes banks will decide to be a part of the consumer proposal over reposessing your vehicle. Depends on the age and value of your vehicle.

  • Will revoke all credit cards, but you CAN get a secured credit card to start re-building credit right away.

Debt Consolidation:

It is a process by which companies try to combine your debts into one payment with an unsecured loan or a secured loan against an asset, such as a boat, RV, car or home. This reduces the overall interest cost on the payments and reduces the total payment you have to make.

  • If you are just at that point that you are not late on payments, but finding to much debt, then this is a good option.

  • If it takes you longer than 3-5 years to pay the entire debt off...look at consumer proposal or debt settlement. At least then your paying only 30-70% of your debts, but it does mess with your credit.


A Bankruptcy officially declares that you are unable to pay your debts. A bankruptcy may not be suitable for everyone as it comes with its consequences.

Although a bankruptcy, frees you of debt at the date of filing, some forms of debt remain to be paid by you. A secured loan, CRA, criminal or legal debts, alimony and child support payments are such debts are not removed after a bankruptcy.

Each of these debt help programs is suitable for different situations and you should consult professional advice to find the right plan for your debt solution.

Not sure where to start, give me a call. I can give you my opinions and suggestions. We also have a fee based program designed to help you decide on your situation and the create a 5 year plan to ensure you are back on your feet with your credit and able to buy a home in the future.

Just send an email to for your free consultation appointment.


Some great resources:

#debt #bankruptcy #consumerproposal #refinancing

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