We were asked: What’s the difference between a consumer proposal and filing bankruptcy when it comes to affecting your credit rating? My wife and I both have ratings in the mid to low 600s but payments are tight with a combined balance of approximately $50,000.
Answer: Consumer proposal results in a R7 (bad) credit rating, which remains on your credit bureau report for 3 years after your proposal is completed. Filing personal bankruptcy results in a R9 (worst) credit rating, which remains on your credit bureau report for 6 years after you receive your discharge from bankruptcy, assuming you would be a first-time bankrupt. The reality is that there is very little difference between how a consumer proposal and bankruptcy affect your credit rating. R7 and R9 credit ratings are basically different shades of black.
When deciding between these options credit rating is not normally a deciding factor. Consumer proposal and bankruptcy are two different tools that essentially do the same thing, help people get out of debt. Which of these “tools” is best for you depends on your situation, including income, assets, total debt and type of creditors. To figure out which of these options is best for you and your wife, I would recommend setting up a free no-obligation initial consultation so that you can review your situation with one of our licensed trustees and discuss the various options.
