Debt Relief Options in Canada

Choose a consumer proposal if you have steady income and assets to protect (home, car, RRSP over $100,000). Consumer proposals reduce debt by 60–80% while letting you keep all assets. They result in an R7 credit rating for 3 years after completion. Choose bankruptcy if you have no assets, minimal income, or debt exceeding $250,000. Bankruptcy discharges 100% of eligible debt in 9–21 months but may require surrendering non-exempt assets. Both options stop wage garnishment immediately. A Licensed Insolvency Trustee (LIT) can file either the same day you meet. Find a Licensed Insolvency Trustee for a free consultation.

Yes. Both consumer proposals and bankruptcy trigger an automatic 'stay of proceedings' under the Bankruptcy and Insolvency Act. This legally stops wage garnishment within 24–48 hours of filing. The stay applies to most unsecured creditors, including the CRA (Requirements to Pay). Debt consolidation, credit counselling, and debt settlement do not provide this protection — only formal insolvency proceedings do.

Yes. CRA tax debt qualifies for both consumer proposals and bankruptcy. Personal income tax debt, interest, and penalties are treated as unsecured claims. Both options stop CRA collection immediately, including Requirements to Pay notices to your employer or bank.

Consumer proposals result in an R7 rating that remains on your credit report for 3 years after you complete all payments. Bankruptcy results in an R9 rating for 6–7 years from discharge. However, if you are already missing payments or in collections, your credit is being damaged anyway. Many people rebuild their credit to 650+ within 1–2 years after completing a proposal. Rules like garnishment limits vary by province — see your province's guide.