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 the total amount owed. | Usually pay the total amount owed |
| Payment schedule | Single monthly payment is 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 5 years | Maximum repayment period of 4 to 5 years |
| Credit counselling | Must attend credit counselling | Credit counselling is optional |
| How will this affect my credit rating? | Remains on your credit report for 3 years after the proposal is completed | Remains on your credit report for 3 years after your debts are paid |
