What Is The Difference Between A Customer Proposal And Debt Management Plan?

We get this inquiry regularly, to a great extent on account of the underlying likenesses many individuals see between these two obligation arrangements. The most straightforward and straightforward answer is:

Debt management plan is for the most part founded on how much obligation you have, while Consumer Proposals depend on your capacity to pay.

However, the reality is slightly more nuanced — with several other factors impacting which solution may be most appropriate for you. Let’s take a look.

Debt management plan

Many debt management companies make arrangements with creditors to either reduce or eliminate interest, then work with you to develop a payment plan. This typically involves you making a single monthly payment to the debt management company — which includes their service fee — which the company would distribute to your creditors until the debt is paid in full. It is a win-win arrangement. The debt management company typically charges a monthly fee of 25% to 30% of the total debt and seeing that you are working with the professionals at a debt management company, it may be the best outcome for both you and the creditors.

You will most likely be able to negotiate some sort of discount on your interest rate. It could be as little as 7% or less, down from more than 12%. This is also very advantageous to you since thereby you save money overall — as well as reduce your total balance owed. Depending on the level of debt you have, your interest rate, and the amount owing, it may make sense for you simply to go with a debt consolidation loan that will help you avoid the accumulation of more interest and fees on top of your current balances.

There are also other advantages to this arrangement. For instance, if you are attempting to avoid bankruptcy, one advantage is that the payments under a debt management plan must be made on time or else they will be reported to credit bureaus as missed payments. This can help prevent your creditors from attempting to sue for payment.  If you find yourself struggling to pay your debt, a debt management company (DMC) will step in and help you put together the best debt management plan possible that will work for you under the current economic landscape.

Consumer proposals

The main difference occurs in the fact that a consumer proposal is when a creditor uses their debt as collateral against your ability to pay. A client proposal targets individuals who are already behind on their bills — not those who are in default or bankruptcy covering their debts. A consumer proposal is anonymous and personal. First, a creditor sends you an offer in writing — and you have 30 days to either accept or reject it. If you do not accept by turning in your proposal to the creditor, they may take legal action against you to force repayment.

If a consumer proposal is successful, creditors are more likely to negotiate with customers. This means they are more likely to lower their interest rates and fees, as well as work out payment plans that will work for each individual customer. Creditors are also more likely to accept negotiation proposals without filing a lawsuit because they know how difficult it is for debtors to pay off their debts even when they also receive federal stimulus funding that can help ease the burden of their payments. The difference between proposals and debts

Consumer proposals have many benefits over debt management plans. For one thing, there are no up-front fees.  There are also fewer restrictions on what you can negotiate with creditors — such as whether or not you want to keep the products or services that prompted the debts in the first place. 

If a creditor chooses to accept your proposal, you must continue making payments until your debt is repaid in full. There are no options to submit another proposal or to pay only a portion of the debt. The creditor may also propose that you make a lump sum payment instead of monthly payments.

When making any kind of financial decision, you will have to consider your personal situation. These can be especially challenging when you find yourself in debt. It is important to keep in mind that while it is beneficial to work with a debt management company there are some things that will not work for everyone and if these options do not work for you this does not necessarily mean that your situation is hopeless and walking away from your debts may be the best course of action for you personally. No matter what your needs or circumstances are, you should be able to find a debt management plan that can help you out to the best of your ability. 

What makes a good Proposal?

Consumer Proposals aren’t right for everyone. The LIT will consider a range of factors in determining whether it would be a beneficial option for you, including?

Are the payments manageable within your current budget?

Will the payments be manageable for you over time (potentially up to five years)?

Will the creditors receive more value from the Proposal than they would through a Bankruptcy?

Unlike a debt management plan, the total amount you repay may be significantly less than what you currently owe. It depends entirely on your personal circumstances  — in other words, your ability to pay.

Debt management vs. Consumer Proposal

A debt management plan offers reduced rates and fees and does not end if you file Bankruptcy. 

Federal bankruptcy Resource Center – Search for “Debt Management Plans” If you have a Consumer Proposal with a creditor, it will be included in your bankruptcy case even if you file Bankruptcy. It’s “like filing twice” so you need to consider the pros and cons of both options. To learn more, read the article below:

It’s important to know that neither option enables you to skip filing Bankruptcy if your financial situation improves as your debts get paid down by a debt management company. Consumer Proposals do not, however, prevent you from filing bankruptcy at a later date.

Debt Management Programs vs. Consolidation Loans: Which Is Better?

This is the question on many people’s minds in today’s economy. Consumers must weigh the pros and cons of these plans to determine which will work for their specific situation. 


A debt management plan can help you consolidate and pay down your debt, but in order to use them, you must first see a Certified Debt Negotiator. Ultimately the best solution is to find a Certified Debt Negotiator in your area and work one on one with them. However, if that isn’t possible, reach out to us and we will help direct you in the right direction.

If any creditors are willing to negotiate with your proposal, this is a good time for you to negotiate a better deal — no matter what your financial situation is like. Even if the creditor initially rejects your proposal, you may be able to get them back in line by appealing again later on or by negotiating with other creditors with whom they have business deals.

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