Bankruptcy vs. Credit Proposal: What’s the Real Difference?

Not all help is equal.

When you’re struggling with debt, it can be hard to know which path will help you move forward fastest. In Canada, the two most common options people consider are bankruptcy and a credit proposal — but they’re not created equal, especially if you plan to qualify for a mortgage in the future..

Let’s break it down.

Bankruptcy typically lasts around 10 months. During that time, you’ll make minimal payments to your trustee, and once it’s discharged, you can start rebuilding your credit right away. With the right steps, many people are able to qualify for prime mortgage rates within two years of their bankruptcy being cleared. It’s not the end of your financial story — it’s a reset button that can help you rebuild smarter.

A credit proposal, on the other hand, usually lasts three to four years. After that, you still need another couple of years to rebuild your credit before most lenders will consider you for a mortgage. That means it could take five to six years before you’re back in a strong borrowing position.

While both bankruptcy and a credit proposal affect your credit similarly, the timeline for recovery is what really sets them apart. If qualifying for a mortgage is important to you, bankruptcy often allows you to bounce back faster.

Tonia Mercer, Mortgage Broker - The Mortgage Missus Inc.- Premiere Mortgage Centre Inc.

About the author,

Tonia Mercer is seasoned mortgage broker. She has been in the industry for 17 years, in 2021 she launched her own brokerage The Mortgage Missus Inc.. Recently, to provide a wider range of products to her clients she decided to partner with Premiere Mortgage Centre. She hit the ground running and is exciting about the opportunities the move will bring to her and her clients.

Tonia is passionate about financial education and believes that working with independent experts is the best way to get unbiased, professional advice. She has joined forces with local independent home and auto, financial advisor, legal, appraiser and real estate service providers. Effectively creating a concierge service for all things financial and real estate.

Tonia donates a portion of all mortgage revenue to Mercer's Mission, a street dog and cat feeding mission in the Dominican Republic. https://www.facebook.com/mercersmission 

She can be reached at tonia@themortgagemissus.ca