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Refinancing, a consumer proposal or bankruptcy: what’s the difference?

Three ways out of debt, three different consequences: what refinancing, a consumer proposal and bankruptcy are, and who each one is for.

By David Ponce, mortgage broker

Reading time: 4 minPublished on October 19, 2026

A woman on the phone, sitting on a sofa, listens carefully and takes notes in a notebook.

In brief

Refinancing brings your debts together in your mortgage: you pay back everything you owe, with a single payment, but with costs, often more interest overall, and your home as security. A consumer proposal and bankruptcy are legal processes run by a licensed insolvency trustee: they reduce or wipe out part of your debt, but stay on your credit report for several years. If you can’t repay all your debts, even combined, talk to a trustee: they are the ones who can offer these two options.

The number to remember

$250,000

The debt limit for a consumer proposal, not counting debts secured by your principal residence, such as the mortgage.1

How does it work?

Three options, three different logics. Here’s what each one does, and who it’s meant for.

  1. Refinancing

    You borrow against the value of your home to pay off your other debts, and then you have just one payment. You pay back everything you owe. You need to own your home, have enough equity (the share of the home that is truly yours) and an income that can handle the new payments. It isn’t an insolvency process.9 13 14 11

  2. A consumer proposal

    With a licensed insolvency trustee, you offer your creditors to repay part of your debts, or over more time, or both, over 5 years at most. If it’s accepted and you keep to it, you keep your assets, including your home as long as you pay your mortgage, and you’re released from the debts it covers.1 3 2

  3. Bankruptcy

    This legal process releases you from most of your debts. The trustee sells your seizable assets to pay your creditors, but some assets are excluded by law. For a first bankruptcy, you can get an automatic discharge after 9 months, or 21 months if you have to pay part of your income to the trustee (surplus income), unless someone objects. The Quebec government describes it as a last resort.5 4

  4. Where to start

    For a proposal or a bankruptcy, only a licensed insolvency trustee can guide you: a professional licensed and supervised by the Office of the Superintendent of Bankruptcy. A trustee can present all your options and, as a rule, doesn’t charge for the first consultation.2 6

A couple talks calmly at the dining room table in the evening, one hand resting on a closed folder.

Compare your options calmly, with the right numbers in front of you.

Example

Made-up example

How long on your credit report?

Julie signs a consumer proposal in January 2027 and makes her last payment in January 2031.

Proposal signedJanuary 2027
Last paymentJanuary 2031
3 years after the last paymentJanuary 2034
6 years after signingJanuary 2033
Removed from the credit report, on the earlier of the two datesJanuary 2033

According to the Financial Consumer Agency of Canada (FCAC), Equifax and TransUnion remove a proposal 3 years after it’s fully paid, or 6 years after it’s signed, whichever comes first.

For a bankruptcy, it would generally be 6 years after the discharge, and 7 years at TransUnion in Quebec. A first bankruptcy discharged in October 2027 would stay on the report until October 2033 at Equifax and October 2034 at TransUnion.

Paying on time is still what matters most for your score.

Made-up example, to show how the dates work. The actual dates depend on your file.

What are the downsides, and when isn’t it the right option?

Refinancing isn’t always the right option.

  • It doesn’t reduce what you owe. If your income can’t cover all your debts, even combined, a consumer proposal or another option may suit you better.
  • If a proposal lets you keep your home and repay only part of your debts, it may cost you less than a refinance. A trustee can make the comparison with you.
  • Combining your debts without changing your spending habits leads to new debt.
  • A proposal and a bankruptcy stay on your credit report for years, and a bankruptcy brings the lowest credit rating. In a bankruptcy, the trustee sells your assets that aren’t protected by law, and your home can be one of them. An accepted proposal that you keep to lets you keep it instead, as long as you pay your mortgage. Own a home? Talk to a trustee before you decide.9 4 7 3

Frequently asked questions

What is the difference between a consumer proposal and bankruptcy?

With a consumer proposal, you offer your creditors to repay part of your debts, or over more time, or both, over 5 years at most; if it’s accepted and you keep to it, you keep your assets, including your home as long as you pay your mortgage. In a bankruptcy, the trustee sells your seizable assets to pay your creditors, but some assets are excluded by law.

How long does a consumer proposal stay on your credit report?

According to the Financial Consumer Agency of Canada (FCAC), Equifax and TransUnion remove a proposal 3 years after it’s fully paid, or 6 years after it’s signed, whichever comes first.

Who can help with a consumer proposal or a bankruptcy?

Only a licensed insolvency trustee can guide you: a professional licensed and supervised by the Office of the Superintendent of Bankruptcy. A trustee can present all your options and, as a rule, doesn’t charge for the first consultation.

Related questions

The other guides, and our short answers to frequently asked questions.

Sources

  1. Office of the Superintendent of Bankruptcy, “You Owe Money: Consumer proposals” (opens in a new tab), consulted on September 25, 2026.
  2. Office of the Superintendent of Bankruptcy, “Compare debt solutions” (opens in a new tab), consulted on September 25, 2026.
  3. Office of the Superintendent of Bankruptcy, “Consumed by debt? Information for consumers on the insolvency process” (opens in a new tab), consulted on September 25, 2026.
  4. Office of the Superintendent of Bankruptcy, “Considering bankruptcy” (opens in a new tab), consulted on September 25, 2026.
  5. Government of Quebec, “Bankruptcy” (opens in a new tab), consulted on September 25, 2026.
  6. Office of the Superintendent of Bankruptcy, “What is a Licensed Insolvency Trustee?” (opens in a new tab), consulted on September 25, 2026.
  7. Financial Consumer Agency of Canada (FCAC), “How long information stays on your credit report” (opens in a new tab), consulted on September 25, 2026.
  8. Government of Quebec, “About the voluntary deposit” (opens in a new tab), consulted on September 25, 2026.
  9. FCAC, “Debt consolidation” (opens in a new tab), consulted on September 25, 2026.
  10. ZenFi, “Frequently asked questions” (opens in a new tab), consulted on September 25, 2026.
  11. Office of the Superintendent of Bankruptcy, “Your debts are getting out of control” (opens in a new tab), consulted on September 25, 2026.
  12. FCAC, “Improving your credit score” (opens in a new tab), consulted on September 25, 2026.
  13. FCAC, “Borrowing against home equity” (opens in a new tab), consulted on September 25, 2026.
  14. Autorité des marchés financiers (AMF), “Prêts hypothécaires” (opens in a new tab) (in French), consulted on September 25, 2026.

Sources checked on September 25, 2026. The examples illustrate a calculation; they don’t promise a result.

This guide gives general information, not advice tailored to your situation. Terms vary from one lender and one file to the next.

This guide is a translation of the French version, which is the reference text.

Groupe ZenFi (9498-0356 Québec inc.), a Quebec mortgage brokerage firm registered with the Autorité des marchés financiers (AMF), client number 3003043028.

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