Consumer Proposal vs Debt Management| BDO Canada

Consumer Proposal vs. Debt Management Proposal

There are some pretty significant differences between a consumer proposal, offered by a Licensed Insolvency Trustee, and a debt management plan, which is offered by a credit counsellor or “debt consultant.” The most important thing to note is that a consumer proposal is a legal agreement approved by and offering the protection of the courts, while a debt management plan is completely voluntary—your creditors are not obligated to participate and there is no protection against any legal action brought against you.

Let’s take a closer look at some of the differences between these two debt solutions:

	CONSUMER PROPOSAL	DEBT MANAGEMENT PLAN
Wage garnishments and legal action	Collections calls, wage garnishments and threats of legal action stop when a consumer proposal is filed	A creditor can continue to garnish wages and pursue legal action if they choose not to participate in the plan
Interest charges	All debts included in the proposal are frozen and will not earn any additional interest	It is up to each creditor to decide whether they want to freeze interest charges
Court approved	Filed by a Licensed Insolvency Trustee and approved by the courts	Voluntary agreement that does not receive court approval
Amount of debt repaid	Usually pay only a portion of total amount owed	Usually pay total amount owed
Payment schedule	Single monthly payment based on your financial situation	Single monthly payment
Fees/costs	No additional fees beyond your monthly payment	Additional fees are common and vary widely
Do all creditors have to follow the plan?	As long as most of the creditors vote to approve your consumer proposal, all creditors must abide by it	Any creditor can decide not to participate in a debt management plan; you would have to pay full interest on the debt owed to them
Repayment period	Maximum repayment period of five years	Maximum repayment period of four to five years
Credit counselling	Must attend credit counselling	Credit counselling is optional
How would this affect my credit rating?	Remains on credit report for three years after proposal is completed	Remains on credit report for three years after debts are paid

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