Facing financial challenges can be overwhelming. Mounting bills, creditor calls, and uncertainty about the future can take a toll on both individuals and business owners. For many, the words bankruptcy or proposal carry a heavy stigma, often clouded by misconceptions and fear.
The reality, however, is that these legal tools exist to provide structured, practical solutions to manage debt, protect assets, and ultimately restore financial stability. They are not signs of failure but pathways to regaining control and building a stronger financial future.
Dispelling the Myths
Many people view bankruptcy as a “failure” rather than a legitimate financial strategy. Similarly, proposals are sometimes misunderstood as overly complex or only for businesses.
In truth, both bankruptcy and consumer or business proposals are legal mechanisms designed to help people and companies regain control over their finances. They are not permanent markers of financial incapability, but structured approaches to solving debt challenges responsibly.
Bankruptcy allows individuals or business owners to eliminate most unsecured debts under the supervision of a Licensed Insolvency Trustee (LIT). A consumer or Division I proposal, on the other hand, is a formal agreement with creditors to repay debts over time, often with more favourable terms than bankruptcy.
Understanding these options can help remove the fear and uncertainty that often prevents people from seeking the assistance they need.
Understanding the Impact on Assets and Credit
A common concern is how these solutions affect credit and assets.
Bankruptcy
- Delivers a fresh start by eliminating overwhelming debt.
- May require the surrender of certain assets (depending on circumstances).
- Remains on a consumer credit report for 6–7 years.
Proposals
- Protect specific assets while avoiding full bankruptcy.
- Consumer proposals are generally less damaging to credit and show proactive debt management.
- Division I proposals (for business owners) provide:
- Structured repayment plans
- Legally binding for creditors
- Continuation of business operations
This structure helps prevent asset loss and supports a smoother path to financial recovery.
Choosing the Right Path
There isn’t necessarily one solution that is better than the other. Deciding between bankruptcy and a proposal depends on several factors:
- Debt Levels & Type: The total amount of debt and whether it is secured or unsecured play a key role.
- Income & Cash Flow: Sufficient income to support a repayment plan may make a proposal viable.
- Assets to Protect: If protecting certain assets is a priority, proposals often offer more flexibility.
- Financial Goals: Long-term recovery, future credit requirements, and personal or business objectives must be considered.
A Licensed Insolvency Trustee will help evaluate these factors, guiding clients toward the solution that aligns with their situation and goals.
The Path Forward
Both bankruptcy and proposals provide legal protection, structure, and guidance to help individuals and business owners regain stability. At Faber, we approach every case with empathy and professionalism, helping clients understand their options, plan their next steps, and rebuild their financial confidence.
Breaking the stigma around these solutions starts with knowledge. By understanding how bankruptcy and proposals work and their respective impacts on credit, assets, and long-term financial health, you can make informed decisions with clarity and confidence. Financial challenges are temporary, but the right guidance can provide a foundation for lasting stability.
The Faber Advantage
At Faber, we combine technical expertise with a human approach. Our Licensed Insolvency Trustees offer personalized advice, practical strategies, and ongoing support throughout the process.
We believe in empowering clients to make informed decisions, protecting what matters most, and guiding them toward a fresh financial start. Reach out today for a free consultation. The first conversation could be the start of a new chapter, one where you regain control and peace of mind.
