Consumer proposal

Consumer proposal vs debt management

Comparing a consumer proposal to other debt plans

Consumer proposal vs debt management plan

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.

What are some differences between a consumer proposal and debt management?

Consumer proposalDebt management plan
Wage garnishments and legal actionCollections 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 approvedFiled by a Licensed Insolvency Trustee and approved by the courts
Voluntary agreement that does not receive court approval
Amount of debt repaidUsually pay only a portion of the total amount owed.
Usually pay the total amount owed
Payment scheduleSingle monthly payment is based on your financial situation.
Single monthly payment
Fees/costsNo 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 periodMaximum repayment period of 5 years
Maximum repayment period of 4 to 5 years
Credit counsellingMust 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

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