Debt Management Plan or Consumer Proposal

Question: Recently my husband and I applied for a second mortgage to pay off bills and were declined. Within the past year he lost his job and with no income coming in our credit cards fell behind. He recently got a new job but our credit cards debt is now too large and we are behind on our payments. Only one of our cards is a joint credit card. He is further behind on his credit card debt than I am. I can probably catch up since I am only 3-4 months in arrears. I was thinking if one of us had decent credit it would be easier. We were thinking of a debt management plan or consumer proposal for one or both of us.  What should we do about the joint credit card.  Will it affect my credit rating anyway?

Joint or Single Proposal

The questions you raise are two-fold:

  • what type of debt relief strategy should you consider
  • should you both file, or only one of you

As to the type of debt solution, you are asking about two different procedures and there are some significant differences between a debt management plan and a consumer proposal.

In a debt management plan all of your debts are repaid in full; in a consumer proposal the creditors will often accept less than full payment.  Both procedures have the same impact on your credit report. In a debt management plan you can choose which debts to include, in a consumer proposal you must include all of your unsecured debts.

From a credit rating point of view, if it’s possible for you to repay all of your debts in full, then it would be better for you to not file a consumer proposal or debt management plan.  However, if you are already three or four months behind in your payments, it’s likely that your credit is already damaged, so preserving your credit may not be your biggest priority at the moment.

To compare how long it will take to repay your debts under each scenario, try our debt options calculator.  This may help you choose which option makes most financial sense in your situation.

It may be better for both of you to deal with all of your debts now, and then begin rebuilding your credit once your debts have been dealt with. Your credit is already affected by both your  joint credit card and the fact that you too are behind on your payments.  However, the best advice is always tailored to each persons individual situation. An accredited debt advisor will ask you questions about your particular situation and explain in detail what the implications of each option would be. If you are having difficulty repaying your credit card debt, we suggest you contact a trustee that administers proposals to review your options in more detail.

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