Originally published on Medium
Three years ago, I sat across from a Licensed Insolvency Trustee with $58,000 in credit card debt and a choice: bankruptcy or a consumer proposal.
I chose the consumer proposal. Today, with most of my payments complete and my credit slowly rebuilding, I can finally talk about what that decision actually meant.
The Moment Everything Changed
It wasn't a sudden crisis. It was the slow accumulation of years of "manageable" debt that stopped being manageable. By 2022, I was paying $1,900 a month across seven credit cards—and my balances weren't moving. I'd been paying for two years and somehow owed more than when I started.
The math didn't make sense until I realized that $1,400 of that $1,900 was pure interest.
What I Thought I Knew vs Reality
Before meeting with a trustee, I thought bankruptcy meant losing everything. I thought it was the nuclear option.
I was wrong.
Bankruptcy doesn't mean you lose everything. Ontario exemptions let you keep $7,117 in household items, $13,150 in personal effects, and a vehicle up to $7,117 in value. My 2009 Honda Civic was safe.
But here's what bankruptcy would have cost me: my home equity. I had $22,000 in equity in my townhouse. In bankruptcy, anything over the $10,783 exemption would need to be paid to creditors.
That's why I chose the consumer proposal. I could keep 100% of my home equity without touching it.
The Real Cost Comparison
Bankruptcy option: My trustee calculated I'd pay approximately $18,500 over 21 months, then be discharged.
Consumer proposal option: I offered creditors $22,000 paid over 60 months ($367/month).
So I'd pay MORE money over MORE time. Why?
Three reasons:
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My monthly payment was fixed. Bankruptcy payments fluctuate based on income. With the proposal, my $367 stayed the same regardless of raises or bonuses.
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I kept my house equity intact. That $22,000 in equity was protected.
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I could pay it off early. If I got a windfall, I could pay the full $22,000 any time. Bankruptcy has fixed timelines.
You can estimate your own consumer proposal costs with the Consumer Proposal Calculator at CollectorHQ.
The Credit Impact
Both options wreck your credit. Let's not sugarcoat it.
Bankruptcy: Stays on your Equifax report for 6-7 years from discharge (so 8-9 years from filing).
Consumer Proposal: Stays on your report for 3 years after completion. Since mine was 5 years long, that's 8 years total.
But here's what no one tells you: your credit is already destroyed by the time you're considering these options. When I filed, my credit score was 510. I was 90+ days late on four accounts.
The proposal didn't destroy something pristine—it gave me a structured path to rebuild.
What Actually Happened Over 3 Years
Year 1: Relief and Paranoia
The day my proposal was accepted, the collections calls stopped immediately. After two years of 4-5 calls a day, the silence was surreal.
My $367 payment felt manageable. Compared to the $1,900 I'd been hemorrhaging before, I actually had money left over at the end of the month.
Year 2: Rebuilding Starts
Around month 18, I applied for a secured credit card. Put down $500, got a $500 limit. Used it for gas only, paid it off weekly.
My credit score started inching up: 510 → 542 → 573.
Year 3: The Light at the End
I'm 36 months in now, 24 months to go.
My credit score is 620. I've saved $8,000 in an emergency fund—the first time I've had savings since my 20s.
How to Actually Decide
If you're facing this choice right now, here's my honest breakdown:
Choose bankruptcy if: - You have no assets to protect (no home equity, no valuable car) - Your income is low enough that surplus payments would be minimal - You want the fastest possible path to discharge (9-21 months)
Choose a consumer proposal if: - You have home equity or assets you want to keep - You have income and can afford a monthly payment - You want fixed payments that don't increase with income - You want the option to pay off early
For a detailed comparison, check out the bankruptcy vs consumer proposal guide at CollectorHQ.
Was It Worth It?
Three years later, sitting here with $8,000 in savings and a credit score slowly climbing back to respectability: yes.
Not because the consumer proposal was the "right" choice in some absolute sense—maybe bankruptcy would have been fine too.
But because I made a choice. I stopped drowning. I got help.
The worst financial decision isn't choosing bankruptcy or a proposal. It's choosing to keep drowning because you're too ashamed to ask for help.
Need help evaluating your options? - Consumer Proposal Calculator - Find Licensed Insolvency Trustees in Your Province - Complete Bankruptcy vs Consumer Proposal Guide
Read the full story with more details on Medium.
Find Me Elsewhere
🏠 Website: CollectorHQ.ca
📝 Medium: @marcuschen-collectorhq
💼 LinkedIn: Marcus Chen
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