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111 Waterloo Street, Suite 310
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WHICH IS BETTER A BANKRUPTCY OR A PROPOSAL?

September 5, 2017

The proper answer to that question would depend on the specifics of your situation but read on to learn more.

EFFECT ON CREDIT REPORT:

A first time bankruptcy will show on a credit bureau report for a period of seven (7) years from the date of filing or six (6) years following the bankrupt’s discharge from the proceeding, whichever is longer.

A second or subsequent bankruptcy will show for a period of fourteen (14) years from the filing date.

A proposal will be reported as a public record (R-9) while the proposal is active but will be purged three (3) years following completion.  Since the longest term a consumer proposal can run for is five (5) years, a proposal could show on a credit bureau report for up to eight (8) years.

FUTURE ACCESS TO CREDIT:

Some creditors actively pursue recently discharged bankrupts/proponents as a part of their target market.  This is for several sound business reasons including: the discharged bankrupt/proponent probably has little or no other credit to service; they likely don’t want to file for bankruptcy/proposal again if it could be avoided; and since they are vulnerable, often being shunned by top tier lenders in the first year or two following discharge/completion they will usually be willing to pay premium interest rates.

Credit (debt) often becomes available faster than many people think following a discharge from a bankruptcy or completion of a proposal – nonetheless we advocate for taking a time out and trying to live debt free.

URBAN MYTH:

The urban myth that “if I go bankrupt I won’t be able to get credit for seven (7) years” is predicated on the credit bureau purge rules.

EASE OF ADMINISTRATION:

Proposals are less cumbersome and much easier to administer than bankruptcies, most trustees would prefer to administer proposals rather than bankruptcies.  In fact some trustees have tried to set their practices up as proposal practices.