Cost difference between bankruptcy and consumer proposal

Posted on 21 July 2023

Written by Ashvin Sharma

If you are facing substantial debts and are struggling to make your repayments on time, you may well be considering filing a bankruptcy or a consumer proposal. Overall, the two forms of debt relief are quite different, and you might want to learn more about the differences we recapped between consumer proposal vs bankruptcy. Filing bankruptcy is the best way for a completely fresh financial future, although often it means sacrificing some assets and potentially paying surplus income if you earn over the threshold. Filing a consumer proposal, meanwhile, can reduce your debt by up to 80% and enables you to keep your assets while simply paying an affordable monthly payment. In this article, we outline the cost difference between bankruptcy and consumer proposal so you can decide which may be the best form of debt relief for you.

What is the cost difference between bankruptcy and consumer proposal?

There are costs and fees associated with filing both bankruptcy and a consumer proposal. You often will not notice them because the costs are included as part of your monthly payments. Here is the typical breakdown for each form of debt relief:

Cost of bankruptcy

Your bankruptcy payments will typically vary because they are based on your income. The higher your income, the more you will need to pay towards your bankruptcy. There is a threshold for which you will need to start making payments. This is known as surplus income. You can check the thresholds for surplus income 2023. Your Licensed Insolvency Trustee will receive a filing fee that is set by the Canadian government, and is included in your monthly repayments so you do not notice it. One thing to note is that your monthly bankruptcy payments could change – if your income increases for any reason, so too would your monthly bankruptcy payments. A reputable Licensed Insolvency Trustee will ensure that you are fully aware of the costs involved before filing bankruptcy, and will make you aware of all of your options. At Spergel, unlike other bankruptcy firms, you will be assigned your very own Licensed Insolvency Trustee to walk you through the end to end bankruptcy process, instead of assigning you from person to person.

Cost of consumer proposal

The cost of a consumer proposal will vary from person to person, although usually it can reduce your unsecured debts by up to 80%. The process of filing a consumer proposal involves working with your Licensed Insolvency Trustee to propose an affordable monthly repayment figure to your creditors. Your Licensed Insolvency Trustee will then work to negotiate this with your creditors as a legal form of debt settlement. Once your creditors agree, you will only be committed to making a fixed monthly payment for a period of up to five years when the consumer proposal is completed. Any administration fees are included as part of this monthly fee. Compared to bankruptcy, a consumer proposal enables you to spread out the total cost owed over a longer period of time. This has the effect of reducing your monthly payment, and is often more affordable to most people. Unlike filing bankruptcy, there is no upfront fee you need to worry about when filing a consumer proposal. At Spergel, we have a 99% acceptance rate on any consumer proposals we file. This means you have a 99% chance of having an 80% reduction in your debt when you file a consumer proposal with us.

If you have more questions on the cost difference between bankruptcy and consumer proposal, book a free consultation with an experienced Licensed Insolvency Trustee at Spergel. We have been helping Canadians to choose the right form of debt relief for them for over thirty years, and we are here to help you too. Reach out today – you owe it to yourself.

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Ashvin Sharma

Ashvin Sharma is a Chartered Insolvency and Restructuring Professional and LIT (Licensed Insolvency Trustee) overseeing all of Spergel's offices in the Greater Vancouver Area and British Columbia. He is also our resident expert on homeownership debt and health debt. In his spare time, Ashvin loves to play sports, spend time with family and friends, and serves as a volunteer coordinator for "Free-Them", a Canadian organization committed to raising awareness about human trafficking.

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