Two of the most popular debt management programs used as an alternative to bankruptcy are a consumer Proposal and a debt management plan or DMP. While each have advantages and disadvantages, they are two drastically different debt management services. Understanding the key differences between a debt management plan and a consumer proposal can help you choose the right option for you.
|Debt Management Programs:||Consumer Proposal||Debt Management Plan|
|Who Files||A Consumer Proposal can only be filed through a federally licensed Trustee.||An accredited credit counselling agency.|
|Debt Reduction||Generally up to 85% of your debts.||None. You are required to repay your debts in full.|
|Debts Eliminated||Almost all unsecured debts including credit cards, payday loans, bank loans and tax debts.||Generally only credit card debt and bank loans. CRA will not reduce your debt through a credit counselling agency.|
|Binding on all creditors||Yes, once a proposal has been accepted all creditors are bound by the terms of the proposal.||No, you can pick and choose which debts to include but your creditors can also opt out of the debt management plan.|
|Creditor Protection||Yes||Not automatic; only if creditors agree.|
|Stop Wage Garnishments||Yes||Not automatic, only if creditors agree.|
|Deal With CRA||Yes||No|
|Credit Rating||An R7 rating remains on your report for 3 years after completion||An R7 rating remains on your report for 2 to 3 years after completion|
Getting a Debt Assessment
In most situations, your payment under a consumer proposal will be significantly less than they would be under a debt management plan.
In order to help determine which option is best for you, we recommend you talk to one of our experts about a free, no-obligation debt assessment. During this process we will ask you:
- What type of creditors you owe money to
- How much you owe each creditor
- What your monthly budget looks like.
With this information we can help you determine whether a consumer proposal or a debt management plan is your best choice given your unique financial situation.