Debt Settlement: Comparisons
Understanding the pros and cons of each option can help you take the first confident step toward financial freedom.
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What is the Difference Between Debt Settlement and Personal Bankruptcy?
If you’re overwhelmed by debt and unsure of your options, it’s helpful to compare debt settlement and personal bankruptcy. Both approaches aim to eliminate your unsecured debt, but they work in very different ways — and the right choice depends on your situation.
Debt Settlement in Canada:
- Typically done through a consumer proposal, filed by a Licensed Insolvency Trustee.
- Lets you repay a portion of what you owe over time — usually with up to 80% of your debt forgiven.
- You keep your assets (including your home and vehicle) and avoid bankruptcy.
Personal Bankruptcy:
- Used when repayment is not realistically possible.
- Involves surrendering certain non-exempt assets to your trustee.
- Offers a faster discharge from debt, but with greater impact on your credit and financial obligations.
Find Out How Much You Can Save With a Consumer Proposal!
A consumer proposal is the only legally backed form of debt settlement in Ontario and can reduce your total debt by up to 80%. Use our free debt calculator to see what your new payments could look like.
comparison chart
Debt Settlement vs. Personal Bankruptcy
Debt settlement (usually through a consumer proposal) and personal bankruptcy are both legal ways to eliminate debt — but they come with different impacts and requirements.
This high-level comparison is designed to help you better understand the key differences, so you can start thinking about which option may suit your needs.
| Feature Comparison | Debt Settlement | Personal Bankruptcy |
|---|---|---|
 Legally Binding |
Yes |
Yes |
 Forgiveness of Debt |
Up to 80% forgiven |
Full discharge after process completion |
 Asset Protection |
Keep most or all assets |
May need to surrender non-exempt assets |
 Credit Score Impact |
Moderate (R7 rating) |
Severe (R9 rating) |
 Duration |
Up to 5 years (usually shorter) |
Typically 9–21 months |
 Creditor Harassment Stops |
Immediately upon filing |
Immediately upon filing |
 Public Record |
Not public, but does appear on credit report |
Bankruptcy is public record |
 Cost |
Lower overall cost than bankruptcy |
Varies based on income and assets |
Legally Binding
Debt Settlement
Yes
Personal Bankruptcy
Yes
Forgiveness of Debt
Debt Settlement
Up to 80% forgiven
Personal Bankruptcy
Full discharge after process completion
Asset Protection
Debt Settlement
Keep most or all assets
Personal Bankruptcy
May need to surrender non-exempt assets
Credit Score Impact
Debt Settlement
Moderate (R7 rating)
Personal Bankruptcy
Severe (R9 rating)
Duration
Debt Settlement
Up to 5 years (usually shorter)
Personal Bankruptcy
Typically 9–21 months
Creditor Harassment Stops
Debt Settlement
Immediately upon filing
Personal Bankruptcy
Immediately upon filing
Public Record
Debt Settlement
Not public, but does appear on credit report
Personal Bankruptcy
Bankruptcy is public record
Cost
Debt Settlement
Lower overall cost than bankruptcy
Personal Bankruptcy
Varies based on income and assets
Which option is right for you?
Book a free consultation with Spergel today, and we’ll help you choose the best solution based on your specific situation.
When is Debt Settlement Not the Answer?
Debt settlement may not always be the most practical or available option — especially if your income is limited or you’re unable to maintain monthly payments. In these cases, filing for personal bankruptcy could offer a more direct route to a financial reset.
If your debts far outweigh your ability to repay them, and you have few or no assets, personal bankruptcy may offer faster and more complete relief. It immediately stops collection actions and wage garnishments and can give you a fresh financial start when other solutions just aren’t feasible.
Bankruptcy isn’t the end — it’s a legal process to help you move forward. And at Spergel, we’ll guide you every step of the way with care and compassion.
When is Bankruptcy The Answer?
Here are the key reasons for filing bankruptcy over a consumer proposal:
- If you owe more than $250,000 in debt, bankruptcy is the only form of debt relief you can take
- Bankruptcy is a good option if your creditors are not open to negotiating an agreement with a consumer proposal
- A first time bankruptcy can be completed quickly within as little as 9 months, while a consumer proposal can take up to 5 years
- It offers a completely fresh financial start as soon as you file
next step
How Do I Get Started?
The first step toward debt relief is speaking with a Licensed Insolvency Trustee — the only professionals legally authorized to file all forms of debt relief in Canada.
At Spergel, our experienced trustees offer personalized, non-judgmental support. We’ll meet with you (as often as you need), review your financial situation, and clearly explain every option available — including whether a debt settlement or another solution is best. There’s no pressure, just expert guidance. We’re proud to offer:
- Free, confidential consultations
- Clear, customized debt relief plans
- A 99% acceptance rate on the consumer proposals we file
- Help from the same trustee — start to finish
Everyone’s Situation is Different. Let’s Talk About You.
Book a free call with Spergel today, and we will make a plan with you on how to help.
Real Canadians. Real Success — Like Jordan
“After years of struggling with escalating tax debt and the overwhelming stress it brought into my life, finding Spergel was a turning point for me. Their team approached my situation with an incredible mix of professionalism, empathy, and expertise, taking the time to understand the nuances of my financial dilemma. They negotiated directly with the CRA, securing a payment plan that was both manageable and fair, and even managed to reduce my overall debt. What truly stood out was how they empowered me with the knowledge and tools to take control of my finances moving forward. Thanks to Spergel, I can focus on my career and being a father without the constant worry of tax debt looming over me.”
– Jordan, Ontario
Jordan's Story is just one of many
It shows that once you face your debt and get the right help, life can get better – quickly. Discover more Success Stories of Canadians we’ve helped, or reach out to us.
How We’ve Helped Others
Every debt story is different — and so is every solution. Here’s what real clients had to say about working with Spergel.
Let’s Find the Right Solution for You
Every financial story is different. Let’s talk about yours and explore the solution that fits you best.
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