Struggling with Debt? Choose the Right Option for You

Elizabeth Cockle

When debt becomes overwhelming, you may begin to consider declaring bankruptcy. The good news, says Toronto bankruptcy lawyer Andrew Rogerson, is that unlike in the days of Oscar Wilde, we no longer send people to prison for debt. The better news is that bankruptcy isn’t your only option. There are a number of alternatives to bankruptcy, including making a consumer proposal to creditors

Which option is best for you? Here are the basics:

What is a consumer proposal?

“Often a consumer proposal is a better option than declaring bankruptcy,” explains Mr. Rogerson. “It provides the debtor an opportunity to negotiate a settlement while at the same time offering financial protection from creditors.” A consumer proposal is a simplified, streamlined legal process that allows an individual to settle with creditors without filing for bankruptcy. It involves making an offer to creditors to either pay a portion of the total debt owing, or all of the debt owing, over a period of not more than five years. It typically involves paying a manageable monthly amount to settle the overall debt.

How does it work?

Consumer proposals are available to any person who is insolvent (that is, the person’s debts are greater than the value of the things he or she owns) and whose total debts, excluding any mortgage on a person’s principal residence, do not exceed $250,000. If no creditor or group of creditors requests a meeting to vote on the proposal within 45 days of the filing date, the proposal is automatically accepted. If a meeting is requested creditors have the opportunity to vote either for or against the proposal offer. If a majority of creditors accept the proposal at the meeting, their consent acts as an acceptance by all unsecured creditors. This means that all creditors are bound by the terms of the accepted proposal even if some of them voted against it.

What are the long-term effects?

Once you have fully completed the payments in a consumer proposal, the debts involved will stay on your credit report—available through credit reporting agencies like Equifax and Transunion—for three years.

What is personal bankruptcy?

Bankruptcy is a legal process that involves assigning an individual’s assets to a Trustee in Bankruptcy. This act gives immediate relief to the overburdened individual by halting legal actions by creditors and eventually results in the elimination of most, if not all, of the individual’s debts. The person who makes an assignment in bankruptcy is referred to as the bankrupt. The procedure itself is referred to as filing an assignment.

How does it work?

Once you have filed the assignment in bankruptcy, the next steps include possibly being examined by the Official Receiver (an employee of the Office of the Superintendent of Bankruptcy, which administers and enforces Canada’s bankruptcy laws), a meeting or meetings of creditors, and applying to bankruptcy court for a discharge. For a first-time bankrupt, this discharge from one’s debts can occur in as little as nine months after the assignment is filed.

What are the long-term effects?

A first bankruptcy will stay on your credit report for six years after the discharge date. Subsequent bankruptcies will stay on your credit report for 14 years after the discharge date.

When is bankruptcy not the best solution?

If you are able to settle your debts by paying a portion of them back through a manageable monthly payment plan over a period of time, due to sufficient earnings, you may wish to consider making a consumer proposal.

Making a decision

If debt has taken over your life, the next step is to speak with a lawyer. A qualified bankruptcy lawyer can help you choose the right option, based on your individual situation.

A word of caution: beware of so-called credit counselors, as they frequently operate on a commission to give you even more credit at high interest rates to pay off your original debt. Frequently you are simply replacing one unmanageable debt with another debt, equally unmanageable. A lawyer has no vested interest in any other outcome than seeing you get the best results.


Andrew Rogerson is a bankruptcy and asset protection lawyer, practicing in Bay Street, Toronto. An experienced trial lawyer, he was called to the Bar 1981 and has extensive experience in offshore tax havens. He is a Fellow of the Society of Trust and Estate Practitioners (STEP) and has published articles in the field of bankruptcy, asset protection, and the use of offshore structures. Andrew may be contacted by email at or by telephone at 416-504-2259. His website is
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