Is A Proposal Right For Me?
Comparing a consumer proposal to other debt plans.
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.
|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|