debt solutions

A recent survey showed that 43% of Canadians added to their existing debt thanks to the pandemic. With the added pressure of inflation – many are feeling the strain of making ends meet. 

Every person in Canada has the option to reach out to a Licensed Insolvency Trustee to find a way to reduce their debt and resolve their financial issues. 

In this podcast, John Adamson, Licensed Insolvency Trustee, discusses the two most popular options of debt relief. Today’s discussion focuses on the differences between filing a Consumer Proposal and Bankruptcy.

Questions answered include:

  • What happens when I can’t service the debt I have
  • How a Consumer Proposal affects your credit rating to a lesser degree than Bankruptcy
  • Will you lose your car or home when you become insolvent
  • The benefits of filing a Consumer Proposal vs Bankruptcy
  • How credit counseling can identify problems and help with budget planning for the future

Licensed Insolvency Trustees are federally regulated and approved by the Canadian government. They are the ones that will give you honest advice about all the options that are available for your unique financial situation. Get the facts from an experienced debt expert before you make any decisions.

Wayne Kay  0:03  

Welcome to another edition of the Debt Matters podcast where we love to help Canadians find solutions to their debt with Licensed Insolvency Trustees from across Canada. My name is Wayne Kay and coming up on today’s show, we’re going to be talking about the different financial tools and options available to someone with debt. 

And my guest today, John Adamson from Adamson & Associates, Licensed Insolvency Trustee in Ontario. John, thank you very much for being here. 

John Adamson  0:29  

Thank you. 

Wayne Kay  0:29  

When it comes to talking about Bankruptcies and financial tools for debt, you’re the guy to talk to. You have been doing this for a few years. 

John Adamson  0:37  

Yes, over 25. 

Wayne Kay  0:38  

And still, do you find it quite amazing how people react when they come to you? Big bags under their eyes and stressed out. And all of a sudden, you give them some options, and you see them just sigh a little bit. 

John Adamson  0:52  

You know what I always say to people – if you feel like after you talk to me there’s a weight being lifted off your shoulders, you’re making the right decision. 

Wayne Kay  0:59  

Yes. And that happens right across the country, when people learn that there are options. So we’re going to dive into the different options when somebody comes in. And when we talk about debt – what’s the average? Is there an average number? Is that different for every family?

John Adamson  1:16  

 I don’t think there’s an average number. I think it’s all relative to a person’s situation. The more money you make, the more you spend, and often the more debt you carry.  So no, I don’t think there’s an actual number. 

And I don’t even try to focus on the number. It’s a problem. And you have got to solve that problem. That’s really what we focus on – to somebody who has a low income $50,000, it might be the end of the world, whereas somebody who’s making a couple $100,000 a year – $50,000 worth of debt, they might not think is a problem. So it’s all relative to their situation. 

Wayne Kay  1:47  

Okay, so when we look at an individual case, is there a percentage – or is it just that you see the debt growing and growing and growing and you’re not able to tackle it? 

John Adamson  1:58  

Yes, there’s usually some trigger that causes somebody to call us. But usually, it’s the pattern where, maybe they’re just making the interest payments, but they’re not getting ahead. They’re not making any headway with the debt. It is not going down. So they’re on that treadmill, if you will. And so then it’s okay, what do we need to do? 

Other times, there’s something that happens, maybe suddenly, you go into work and your wages have been garnished and losing 20% of your pay is significant. So there’s some trigger, but there’s always a commonality. And that is, I can’t service the debt that I’ve got, 

Wayne Kay  2:32  

Well, maybe you can tell us about some of the different financial options when it comes to taking care of somebody in debt. 

John Adamson  2:39  

Yes, generally, the two main options that are used across the country are personal Bankruptcy and Consumer Proposals. Consumer Proposals have become really popular, probably in the last decade or so. They’ve been around since 1992. But initially, they weren’t that popular. They’ve become very popular in the last 10 to 15 years. 

They’re a great tool. It allows a person to restructure the debt, get the payment down into something that they can handle, and stop the interest. In most cases, the person pays back a percentage of what they owe, they don’t in most cases, end up paying the whole amount back. 

For most people, if you’re in that situation where I’ve got too much debt, but I can’t make the payments, and I can’t service the whole amount, I can’t pay the whole amount. Maybe it’s 30%, they end up paying back. Each situation is different. But then they’re in a situation where they’ve got one payment, they can handle it, and they avoid a Bankruptcy. 

Wayne Kay  3:31  

So is a Consumer Proposal better than a Bankruptcy? 

John Adamson  3:37  

I don’t know if we can say that. It’s better in a lot of cases – I think they are. But it’s not right for everybody. It’s not the one size shoe that fits everybody. You have to find what works for each person. 

There’s a lot of advantages to them. In my opinion, the most significant difference with a proposal versus a Bankruptcy is in Bankruptcy, your assets (the things that you own or have vested in the Trustee), which is fancy word –  passes to the Trustee. Whereas in a proposal, it doesn’t. So the reality is a person has a lot more flexibility in a proposal when it comes to future assets and income and things like that. There’s no watchdog on them. We settle the debt, we get a payment in place that they can handle and they move on. 

Wayne Kay  4:25  

Now when you talk about their assets get transferred to the Trustee. Explain that.

John Adamson  4:32  

It might not actually happen physically, where you see the asset is transferred to the Trustee but the Trustee would have an interest in that. To give you an example – a person is only allowed to make a certain amount of money each month and it depends on the size of the family. And if they make more than that then the Trustees are entitled to a portion of that they call that surplus income. In a proposal that doesn’t apply. 

The problem with that as a bank sees it – it kind of takes away that if you want to work harder, you want to make some extra money, maybe there’s overtime, those types of things – that takes away that ability to do so in a Bankruptcy. 

You may have a situation in a Bankruptcy where maybe you come into an inheritance. After you file Bankruptcy and you’re not releasing the Bankruptcy yet, that money would go to the Trustee. Whereas in a proposal, it wouldn’t. 

If you’ve got equity in a house, you may end up having to pay some of that equity into the Bankruptcy for the creditors. Whereas with the proposal, it’s just what we’d get the creditors to agree to, and then you get on a payment plan. So it just gives you more flexibility. 

Wayne Kay  5:33  

So after the Bankruptcy is released, and what is that six years or something? 

John Adamson  5:37  

So what happens is, the six years is the timeframe that they can report it on your credit file. 

Wayne Kay  5:43  


John Adamson  5:44  

In a first Bankruptcy, you’re either going to be released, usually in nine months, or 21 months, depending on your income. If you’re a low income person, it will be nine months, and if you’re a higher income person, it’s going to be 21 months. 

If you’ve been bankrupt before, you’re what we call repeat bankrupt – that is either going to be after 24 months or 36 months, again, depending on your income. If you’re low income to 24 months of your higher income, it will be 36 months. 

Wayne Kay  6:06  

Does the person get their house back? 

John Adamson  6:10  

Yes, so let me give you an example. If a person had a house, and they had equity – equity being the difference between what the house is worth, and the amount of the mortgages. Say there was equity of $50,000 in the house, maybe the house is joint with their spouse. So $25,000 would belong to the person who filed Bankruptcy. The court can say you’re not getting out of bankruptcy until you pay that $25,000. So the person would then be on some sort of repayment plan with the Trustee for that equity. 

A lot of times they’ll refinance the house and get the money in and pay it out. But the house then at the end of that, the house goes back to the person – they keep their house. In a proposal that doesn’t happen. We come up with a number and the creditors will factor that into the decision and get it into a payment that works. 

Wayne Kay  6:56  

Okay, do you find that a lot of people – that’s one of the stress points? They kind of want to put their head in the sand and not acknowledge this, because there’s such a worry about losing their car, losing their house, any of that stuff regarding Bankruptcies or Consumer Proposals. And what I’m hearing from you is with a Consumer Proposal, that doesn’t happen, 

John Adamson  7:20  

Correct. I think that’s a concern that people have. We hear it every single day. 

Wayne Kay  7:25  

Okay, that’s pretty important. So every single day, tell me more about that. 

John Adamson  7:31  

I think that’s natural, right? Somebody who’s concerned about, am I going to lose my house, am I going to lose my car – I’ve got to get to work, and I need my car. Those are really valid concerns. 

Generally speaking, the beauty of a proposal, again, is it’s an offer from the person to the creditors to settle. It goes through a trustee. But you get some of the benefits of the Bankruptcy. They can’t garnish wages, the creditors call stop, and things like that. But again, you keep your assets, so you’re not losing that stuff. 

And a lot of times, you might not lose it in a Bankruptcy, each situation is different. But the reality is, that it’s taken all that worry off the table. We get a payment in place, and we move on from there. 

Quite often, in a Bankruptcy, a person’s not going to lose a car. If your car’s financed, and you’re making the payment to the bank, the bank is not going to care. In Ontario, we have an exemption, everybody can have a vehicle in their own name that’s paid off up to $7,117. It changes every year with the cost of living, but it’s just for argument’s sake called $7,100. So if your car’s worth $6,500, no problem. If your car’s worth $9,100, well, you’d end up having to pay $2,000 – the portion that’s over that exemption into the Bankruptcy for the creditors, but you would still keep your car. 

Wayne Kay  8:46  

Okay. Do people ever wonder about leaving the country once this happens – if they file for Bankruptcy or Consumer proposal? 

John Adamson  8:55  

Yes, we do get that question. It’s not, certainly since COVID – it’s not as important as it used to be. But no, we do get that question. It is not reported anywhere. There’s no impact upon you going into another country. It’s not on your passport. Nobody knows about it. 

Wayne Kay  9:11  


John Adamson  9:11  

It’s an odd issue. It’s a non issue. 

Wayne Kay  9:13  

Okay. So you have never had anybody run –  when they just escape and say the heck with this all. I just can’t get ahead of things. I’m going to Costa Rica.

John Adamson  9:23  

I’m sure there’s always some people that do that. 

Wayne Kay  9:25  


John Adamson  9:25  

But, inevitably at some point in time you come back. Now you’ve got a problem you have to deal with. I’ve had a few calls over the years from people that are in the States. Maybe they’ve taken a job opportunity in the States and the creditors do catch up with them. Now they have an issue. It’s the Canadian debt, but it’s been recognized in the US courts and – how do I deal with this? So, the bottom line is – it’s like anything, if you have a problem, you’re best to deal with it. And let’s deal with it. Move on. 

Wayne Kay  9:55  

Okay, is one option better on a credit report than the other? How does that work? 

John Adamson  10:02  

Yes, absolutely, the Consumer Proposal is better than Bankruptcy. Some people will say it’s not significant, but I would argue that it is. In a Consumer Proposal, if you think of R1 being the best and R9 being the worst. Bankruptcy is going to be an R9, a proposal is going to be an R7. But the proposals are reported for three years after it’s finished. Whereas the Bankruptcy is going to be reported for seven years after the Bankruptcy is finished. 

Let’s just say the person gets discharged after 24 months, so you have got two years plus seven years on top of that. Whereas in the proposal it is three years after that. What I always say to people is, if you’re able to pay your proposal off quicker, you’re able to maybe double up on payments, the faster you pay it off, the faster it’s going to fall off your credit file. 

If you’ve had a Bankruptcy before, and you’re what we call repeat bankrupt, the Bankruptcy would be reported for 14 years after the discharge date. Well, three years is a lot better than 14 years. So it can be quite significant. 

Wayne Kay  11:07  

Actually, I had that situation with somebody I know. They said they did a Consumer Proposal and they ended up owing, I don’t know, let’s say $15,000. And by the time everything was done, – I guess it takes some time to file this is what happens. Then all of a sudden it came to a point where they were going to start making the payments. And he actually had by that point, the money to pay it off all in full. I didn’t think that was the best idea to just pay the whole thing off in one shot. Was that bad advice? Good advice? 

John Adamson  11:42  

I’m a believer, the sooner you get rid of it, the sooner you get on with your life, the sooner it falls off your credit file. So I know I think it’s good to pay it off. Maybe if you can pay it off sooner, definitely. 

Wayne Kay  11:53  


John Adamson  11:53  

Some people will argue, hey, I’ve got a $250 a month payment that is interest free for five years? Yes. But you’re still tying up credit time that’s going to be on your credit file. So the quicker you get rid of it, the quicker it falls off your credit file. That’s a positive thing for you. 

Wayne Kay  12:08  

Oh, okay, good. I just told him to do it within six months, instead of doing it for five years – instead of just putting out that full amount of money, just in case. Because the problem would have been, that would have been everything he had, and then he wouldn’t have had the little nest egg, if you will. 

John Adamson  12:24  

That’s a fair comment. You never want to leave yourself so strapped that if something happens, the car breaks down. There’s no money.

Wayne Kay  12:30  


John Adamson  12:31  

So you do want to at least have some money behind you. 

Unknown Speaker  12:34  

The thing is, I think a lot of people are learning this, for sure with our show. And by talking with experts, right across the country, they’re becoming more and more aware that when they make that decision to make a phone call and find out more about Bankruptcy, Consumer Proposals or how to get rid of their debt. 

It’s not like they’re walking in and you’re saying, All right, let’s get let’s get this Bankruptcy going, or let’s get this Consumer Proposal going. You’re just giving them some options. 

John Adamson  13:01  

Absolutely. Absolutely. You don’t walk into my office and walk out bankrupt. It doesn’t work that way. You go through it with people, you let them go home, talk to their spouse, maybe their spouse comes. I usually give them some literature to take with them, to have a read through. 

But, I want you to be comfortable with the decision that you’re making. And so there are times maybe, if someone’s wages are being garnished, or if there’s a legal proceeding, and you have to get it stopped by tomorrow. Maybe very rarely that happens. But in a situation where you have to get that filed right away, that can happen. 

But for the most part, most people – they know about it, they’ve come to see us. They’ve got time to think about it, they take home an application, they fill it out, they get it back to us. So the reality is it’s not walk in one door, walk out the other door bankrupt, it doesn’t work that way, 

Wayne Kay  13:52  

Right, but people have this perception that maybe – it’s they’re stressed out, they don’t know. And so this is really good that you’re sharing this kind of great information with them. And they will get credit again, once you go through either of these. 

John Adamson  14:07  

And the proof of that, is that we do see second time bankrupts. So, if you didn’t get credit, again, you wouldn’t have a financial problem again. Right. And that’s the proof. And they’re not a huge percentage, but they are the proof that people get credit again.

Wayne Kay  14:23  

I guess once they work with you, there’s also credit counseling. How do you deep dive into what it was that got them into the situation? 

John Adamson  14:33  

That’s one of the requirements in the counseling to identify the problems. I would respectfully submit that the vast majority of people already know the problem before they come in my door. They’ve had time to reflect on it. They know what it is. 

I would say that counseling is about getting people onto a budget, getting them to start budgeting their money, and then start doing some planning. And I’ve said this for years, I wish this stuff was taught in high school. But it’s about really, this is how much money I’ve got, I’ve got to get myself onto a budget. Because really what our goal here is, we want to solve the problem. But we also want to help people not get back into the same situation again. 

Wayne Kay  15:20  

Well, that’s perfect advice. Anything else we need to know at this point about Bankruptcies or Consumer Proposals or other options for debt? 

John Adamson  15:28  

I would just say if you’ve got a financial problem, pick up the phone, or go on the internet, and send the email, but talk to somebody, okay? And make sure that you’re talking to someone who’s a Licensed Insolvency Trustee, because we are the only people who can offer these options. And don’t put it off, address it, come talk to us, because you’ll get peace of mind. Once you know what your options are, you’ll feel better. 

Wayne Kay  15:56  

Yes, and you’re regulated by the federal government as well. So they keep tabs. That’s very important. And it’s a free consultation for most places. And if somebody wants to schedule that free consultation with John and his team, very simple, just go to John, thanks very much for being on the show today. 

John Adamson  16:19  

Thank you for having me. 

Wayne Kay  16:20  

Well, that’s it for today’s Debt Matters podcast. You can subscribe wherever you get your favorite podcasts from. And of course, if you want more information, you can always check out our website at Thanks for listening.

About John Adamson

John founded Adamson & Associates Inc. in 1996. His experience includes more than 25 years of helping individuals, small business owners find solutions to their financial problems. John is approachable, easy to talk to and enjoys helping people solve their debt challenges.

Additional Resources