Should You File a Consumer Proposal or Opt for a Debt Management Plan?
A debt management plan is very similar to a consumer proposal. Below we list similarities and differences between them.
Consumer proposal & debt management plan: similarities
- Both consumer proposal and debt management plan involve you making payments to your creditors over a period of time.
- They both combine your unsecured creditors so you only make one payment each month, instead of trying to make payments to many different creditors each month.
- They both have an equal impact on your credit report.
Consumer proposal & debt management plan: differences
- Debt management plan is administered by a credit counselor while a consumer proposal is administered by an Administrator, typically a Licensed Insolvency Trustee.
- In a debt management plan you are required to repay all of your debts in full; all future interest is forgiven. In a consumer proposal you may not necessarily be asked to repay your debts in full. You will make payments based on what you can afford, which may not be the full amount you owe.
- Filing a consumer proposal is a legal process, and it stops wage garnishments and other collection action. Garnishments only stop in a debt management plan if the creditor agrees to stop them.
- In a consumer proposal debts to Canada Revenue Agency can be included. It is difficult, although not impossible, to include tax debts in a debt management plan.
To find out which option best fits your specific situation – a consumer proposal or a debt management plan – contact a credit counselor or a Licensed Insolvency Trustee for professional advice.