The fact that you filed a consumer proposal will stay in the legal section of your credit report for up to three years after you complete your proposal. This is in contrast to the 6 years that a bankruptcy will be reported.
Of course the comparison is not that simple. A consumer proposal will run anywhere from 3 to 60 months. You may be bankrupt for anywhere from 9 months to 36 months (or longer if you don’t complete your duties).
The real question that needs to be asked is whether a consumer proposal looks better or worse than a bankruptcy on your credit report. The truth is they are about the same. If the only reason you are opting for a consumer proposal instead of filing for bankruptcy is because it looks better on your credit report than filing for bankruptcy, you should think again. An argument can be made that if you completed your bankruptcy in the minimum amount of time (usually 9 or 21 months) and then started saving you may repair your credit faster than if you filed a 5 year proposal. This is a tricky comparison however. Its not so much what type of insolvency filing you choose more than it is:
- how well you manage your finances after your bankruptcy or proposal;
- how fast you begin to save so you can repair your credit after filing;
- how wisely you use credit once it is available to you again.
I am a great proponent of consumer proposals – in about 2/3 of all the cases that I see a consumer proposal is the correct solution to deal with peoples’ debts. For the other third, bankruptcy makes more financial sense. All I am really trying to say is don’t base your decision of whether to file a consumer proposal or bankruptcy on how the credit reporting system works. For all intents and purposes, the credit reporting system treats consumer proposals and bankruptcy the same.