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