Consumer Proposal vs Debt Management Plan

consumer proposal versus debt management planYou are looking for some debt relief and have heard about both a debt management plan and a consumer proposal.  How do you know which one is the best option for you.  Will your payments be different under a debt management plan or consumer proposal? How are your creditors affected? Each program has it’s pros and cons. Which you choose depends upon your debts, your budget and your individual circumstances.

Can You Afford To Repay All or only Part of Your Debt?

When comparing a consumer proposal vs debt management plan alternatives the correct answer depends on the amount you owe, and how much you can afford to pay each month.

One of the biggest differences between the two debt relief options, is that under a debt management plan, offered by credit counsellors, you are generally required to repay all of your debt in full, over a three to five year period.  Often the creditors will agree to a reduced or zero rate of interest.

Under a consumer proposal you will not necessarily repay all of your debts in full – you can settle your debts for less than you owe. The creditors will request more than they would receive in a bankruptcy, which is often less than the full amount owed.

Therefore if you can afford to repay all of your debts in full over a three to five year period, a debt management plan may be the correct debt relief answer.  If you cannot afford that, a consumer proposal may be a better option.

In either case, a note will appear on your credit report for three years after all of your payments are made, so from a credit report point of view both debt relief options are identical.

If you think a Debt Management Plan is the right solution you should start by talking to an accredited credit counsellor. A consumer proposal must be administered by a consumer proposal administrator, who is also a trustee in bankruptcy.

Talking to a professional always helps. If you would like more information on which option might work best for your, contact an advisor today for a free debt evaluation.

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