Consumer Proposal or Debt Management Plan

Category: Consumer Proposal (10) comments

If you have a lot of debt and you want to avoid bankruptcy, you may consider a consumer proposal or a debt management plan. What’s the difference between these two debt solutions?

A debt management plan is administered by a not for profit credit counsellor, and they are often able to negotiate a settlement where you repay your debts in full, but often at reduced or zero interest.

For example, if you owe $60,000 on credit cards, it may take you many years and $100,000 to repay the credit cards with interest. In a debt management plan you would repay around $60,000, with no interest, so your payments would be approximately $1,000 per month for 60 months. A debt management plan is a good solution if you have the ability to repay your debts in full, but need a break on the interest.

A consumer proposal is a debt solution administered by a licensed bankruptcy trustee acting as the consumer proposal administrator, who will negotiate a settlement with your creditors. If the creditors agree, you may pay back less than the full amount owing.

Returning to our example above, you may offer a consumer proposal where you repay half of the debts, or $30,000, for payments of $500 per month for 60 months. In this example your payments would be half of what you would pay in a debt management plan.

In addition, if more than half of the dollar value of your creditors agree, all unsecured creditors are required to accept your consumer proposal, so you have certainty that a consumer proposal is a solution for all of your debts.

You best solution is to talk to a trustee in bankruptcy.  They can explain the costs to you of both options based on your unique circumstances and help you choose which option is best for you.

To discuss your options, contact a trustee today.

Leave A Comment

  1. Sylvie

    If we settle for a consumer proposal, what would happen if you sold your home 1 or 2 years later? Would the monthly payment of your consumer proposal change?

  2. J. Douglas Hoyes

    Hi Sylvie. If you sell your home your consumer proposal payment does not change. Once the proposal is accepted, the payment is locked in. Of course, you could choose to use the proceeds from the sale of your home to pay off your proposal immediately if you wish.

  3. Leslie H.

    I’m losing all my life savings 200,000$ selling my home now .. Hasn’t sold yet
    My mortgage 305k$ due in June
    What if my house doesn’t sell !!
    Going for debt proposal next wk on 22,000$ credit but worried still about house sale ? My only money comes due is an accident annuity may 15 of 200,000$ & I’m afraid they will try to touch my only income from this … I’m only 63 .. Disabled 26 yrs .. Single never missed a payment in my life but have credit overload !! Pay pay for everyone to help me & last house a terrible tragedy !!! Do I wait for sale or bankruptcy or do Just debt prosoma now ?? How much does that usually cost ?? When u don’t have money ??

    1. J. Douglas Hoyes

      Leslie: You are asking some very important questions. You should immediately book a consultation with a trustee to review your options. You want personalized information for your unique situation.

      I will make one comment, and this is an issue you should discuss with your trustee: If you expect that in the future you may be forced to sell your house at a loss, you should probably wait to deal with your house before filing a consumer proposal. In a consumer proposal you can include all unsecured debts, so if you sell the house and suffer a shortfall, that loss can be included in your proposal. However, if you are continuing to pay the mortgage at the time of your proposal you have not yet incurred the loss, so the future loss cannot be included in your proposal. It probably is not in your best interests to do a proposal now for $22,000 in debts if you may have much larger debts in the future when you sell your house.

  4. Julie


    We have 2 repos, husband lost his job a year ago and we could not keep up after plunging for 6 months in our savings. They sold both vehicles but say that we now owe them over 50000$ for both vehicles. We also have some c.card for about 10000$ that we have arrangements with and able to keep up with. No mortgage. Should we go for a proposal or management ? Don’t want to bankrupt.

    1. J. Douglas Hoyes

      Hi Julie. The answer depends on your income, and other assets. In a debt management plan you pay back your debts in full (100 cents on the dollar), but you do get a break on the interest. If you can afford to repay everything in full, this is an option. However, if you can’t afford to repay in full, a consumer proposal may be a better option, because often the creditors will agree to a proposal of much less than the full amount owing (say 35 cents on the dollar).

      Each case is different, so you should contact a licensed insolvency trustee for a no charge initial consultation, and they can explain your options.

  5. Maggie D.

    I started a consumer proposal a few years back and it failed as I was forced to rely on social assistance for a time. Most if not all of my debts are 7-8 years old now . I am now employed part and just managed to buy a car. Suddenly CMHC is calling regarding the 30k shortfall from the house I lost when all went bad. My former husband and had a bankruptcy 34 years ago. Can I refile a proposal? Will include the old CC debts? Can I keep my car?! Or should I just continue to allow my tax refunds to be taken by CMHC?

    1. J. Douglas Hoyes

      Hi Maggie. It is not uncommon for CMHC to take many years to pursue someone for an old shortfall.

      If is possible to file a second proposal, but there are very specific technical requirements after a failed proposal, so you should talk to a licensed insolvency trustee to review all options. If the shortfall is $30K than presumably it will take many years for your tax refunds to eliminate the debt, so it would be prudent to investigate all of your options.

  6. Shaz

    My spouse and I filed a 5 year consumer proposal 2 years ago is there anyway we can apply to use equity from our home or take out a 2nd mortgage to pay the Consumer proposal early ?

    1. Ted Michalos

      Certainly – that is a fairly common strategy that people use. Just be careful about the interest charges on the second mortgage. Remember, there is no interest charged on the proposal – these days second mortgages run anywhere from 9 to 18% interest. Make sure whatever you decide to do makes financial sense…


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