What a consumer proposal and a bankruptcy actually are
Both are formal insolvency proceedings under federal law, and both are administered by a licensed insolvency trustee. Neither one is a loan, and neither one is something you can run yourself. A consumer proposal is an offer you make to your creditors to settle what you owe, usually through a set series of payments. A bankruptcy is an assignment of your assets to a trustee, followed by a discharge process that deals with the debts that remain.
In a consumer proposal, your creditors vote on the offer. If it is accepted and you complete the payments, the debts covered by the proposal are settled and the proceeding ends. You generally keep the assets you already own, unless the proposal itself says otherwise.
In a bankruptcy, the trustee takes control of the property you own that is not protected by law, deals with what can be dealt with, and distributes the result among your creditors. Your remaining obligations are then resolved through the discharge process. Not every debt is erased. Certain categories survive a bankruptcy, and the Office of the Superintendent of Bankruptcy Canada sets out which ones and how the process works.
Neither route is free. Trustee fees and administrative costs apply to both, and they vary by file and by province. Current figures are published rather than fixed forever, so ask a trustee for a written estimate before you commit to anything.
Who administers each route, and who does not
Only a licensed insolvency trustee can administer a consumer proposal or a bankruptcy. You cannot file either one on your own, and no lender, debt consultant, credit repair company or matching service can file one for you. The trustee assesses your situation, prepares the filing, communicates with your creditors and reports to the Office of the Superintendent of Bankruptcy Canada.
That single fact separates the two formal routes from almost everything else sold in the debt-help market. A debt settlement arrangement, for example, is a commercial agreement rather than a legal proceeding, and it does not carry the same protection from collection activity that a proposal or a bankruptcy does.
For questions about borrowing rather than insolvency, the regulator depends on the lender. Federally regulated financial institutions' consumer complaints go to the Financial Consumer Agency of Canada, which publishes plain-language guidance on debt and borrowing. Provinces license and supervise most other lenders, so the rules, the complaint route and the protections differ depending on who you are dealing with and where you live.
Consumer proposal vs bankruptcy: a side-by-side comparison
| Point of comparison | Consumer proposal | Bankruptcy |
|---|---|---|
| What it is | An offer to settle unsecured debts, usually paid in instalments | An assignment of assets to a trustee, followed by a discharge process |
| Who administers it | A licensed insolvency trustee | A licensed insolvency trustee |
| Your assets | You generally keep what you own unless the proposal says otherwise | Non-exempt property comes under the trustee's control |
| Your creditors | They vote on the offer; covered debts are settled on completion | They are dealt with through the estate and your discharge |
| Collection activity | Generally restrained while the proceeding is in effect, subject to the rules that apply | Generally restrained while the proceeding is in effect, subject to the rules that apply |
| How it ends | When you complete the payments and the proposal is performed | When you are discharged from the bankruptcy |
| Credit report entry, first filing | 3 years after completion, or 6 years from filing, whichever comes first | 6 years after discharge |
| New borrowing afterward | Lenders apply their own policy; a completed proposal shows an arrangement finished as agreed | Lenders apply their own policy; the entry remains until six years after discharge |
Read that table as a set of trade-offs rather than a ranking. A proposal usually means keeping more control over what you own while paying more, over a longer period. A bankruptcy usually means less control over your assets, with the mark on your file tied to your discharge date rather than to a payment schedule.
How long each one stays on a credit report
A consumer proposal stays on a credit report for 3 years after completion, or 6 years from filing, whichever comes first. A first bankruptcy stays on a credit report for 6 years after discharge. Both figures describe the entry on the credit report. Neither describes the length of the legal proceeding, and neither is the same as an individual lender's internal waiting period.
Notice that the two clocks start from different events. The proposal clock can end at six years from filing even if payments are still running, because the outer limit is measured from the date you filed. The bankruptcy clock starts at discharge, so anything that lengthens the discharge lengthens the time the entry stays on file.
Canada has two national credit reporting bureaus, Equifax Canada and TransUnion Canada. Both hold consumer credit files, and a lender may look at one or both. Because a credit file is a record of what happened rather than a judgement about you, the practical thing that matters most is what your file looks like after the proceeding ends.
What this means if you are looking for a loan on poor credit
First, the disclosure: loanmoose.ca is not a lender. It does not make loans, set rates, or make credit decisions. It is a Canadian loan matching and comparison service that connects people with lenders and brokers, and every approval, rate and term is decided by the lender, not by us.
People searching for bad credit loans with a proposal or bankruptcy in their history are usually asking two questions at once: will a lender consider me at all, and what will it cost? The first is a policy question that each lender answers for itself. The second is a price question, and price is where the law sets some hard edges.
The Criminal Code caps the criminal rate of interest at 35% per year under section 347. Where a province operates a licensed payday lending regime, the federal Payday Lending Regulations (SOR/2024-114) cap the cost of borrowing at $14 per $100 advanced. Some provinces set a lower cap, and the lower cap applies. Quebec does not license payday lending, which effectively prohibits the model there. A payday loan is generally up to $1,500 for a term of 62 days or less.
Those are ceilings, not quotes. They do not tell you what a particular lender will offer you, and nothing on this page is an offer of credit.
If your next goal is a personal loan for bad credit, the things that move your outcome are largely the same ones that move it for anyone: steady income you can document, a bank account with some history, collateral or a down payment where the product allows it, and a file with no new missed payments since the insolvency. A loan on poor credit is usually priced for risk, and risk is assessed from recent behaviour far more than from the label that sat on your file years ago.
Mortgages follow a separate rulebook. Federally regulated mortgage lenders generally work to a total debt service ratio ceiling of about 44%, and they qualify an uninsured mortgage at the greater of the contract rate plus 2 percentage points and 5.25%, under OSFI Guideline B-20. A trustee can give you a factual picture of your situation, but whether any particular lender will lend to you is that lender's decision. The lowest rates are only available to the most qualified applicants.
For background on where rates sit, the Bank of Canada publishes the policy interest rate, the prime rate, conventional mortgage rates and Government of Canada benchmark bond yields. These are benchmarks, not offers, and no lender is obliged to lend at them.
What to look at before you choose a route
- What you own, and how much of it is protected. Exemption rules are set by provincial law, so the answer depends on where you live and what the asset is.
- What you earn. In a bankruptcy, income above a set level can create a payment obligation, calculated using the standard that applies to your household size.
- Which debts are involved. Some debts are not released by either route, and the Office of the Superintendent of Bankruptcy Canada lists the categories treated differently.
- How your creditors are likely to vote. A proposal needs creditor agreement, so the mix and number of creditors matters.
- What you want the next several years to look like. A shorter but heavier mark on your file and a longer but lighter one are different trade-offs, and only you can weigh them.
- What it costs. Ask for the fees in writing before you sign anything, and ask what happens if your circumstances change partway through.
This guide explains how the two routes work. It is not financial, legal or tax advice, and the right answer depends on your individual circumstances. For a decision of this size, speak with a licensed insolvency trustee and, where it matters to you, with a regulated professional who can look at your full picture.
Where to get the official information
The Office of the Superintendent of Bankruptcy Canada publishes the federal rules, the duties of a licensed insolvency trustee and the detail behind both proceedings. The Financial Consumer Agency of Canada covers debt and borrowing from the consumer side, including how credit reporting and complaints work. Start with those two sources before you rely on anything else.