Consumer Proposals Versus Credit Counseling: Which Form Of Debt Relief Is Best?

Consumer Proposals or Credit Counseling

If you’re one of the two in every five Canadians that fears they will never be debt-free, debt relief could be the answer to your prayers, enabling you to clear your debts and start again in a financially responsible manner.

However, if you are planning to seek debt relief, it’s imperative that you select the most effective solution.

Consumer proposals and credit counseling are two options that deserve careful consideration.

Need Help Reviewing Your Financial Situation?
Contact a Licensed Trustee for a Free Debt Relief Evaluation

Call 877-879-4770


What Is Credit Counseling?

Credit counseling services are, as the name suggests, a group of financial advisory services.

Typically, a financial expert will run an audit of your financial situation before making suggestions on how you can improve your situation.

It focuses primarily on the idea of educating individuals on budgeting and debt prioritization.

An example of credit counseling services may include:


  • An analysis of your income and monthly outgoings (excluding the debts you owe);
  • An analysis of your secured and unsecured debts;
  • Consolidate debts and negotiate new repayment timeframes with creditors;
  • Negotiate with creditors to reduce or freeze interest payments;
  • Advice on future budgeting and cash flow management;
  • Ongoing monthly reporting and tracking.


This type of service can be offered by non-profit services as well as for-profit financial companies, but clients are required to pay ongoing monthly fees for the service.

What Are Consumer Proposals?

A consumer proposal is a form of debt relief in which a Trustee consolidates your debts to negotiate a reduced payment plan with creditors.

Repayment plans can last for up to five years and form a new legally binding agreement that replaces the former repayment plans.

When taking on a consumer proposal, the Trustee may:


  • Analyze your debts, income, and outgoings;
  • Consolidate all unsecured debts to calculate the current costs;,
  • Produce a detailed plan that will leave you enough of a budget for living;
  • Submit the proposal and negotiate a reduced payment and interest rate;
  • Analyze any alternative options that may be available;
  • Ensure that all new agreements are signed by legal contracts.


The service can be facilitated by for-profit and nonprofit organizations, but only a Trustee boasts the credentials to make the proposal.

So, Which Is Better?

No two people are faced with identical financial situations, which is why it’s always important to weigh up the pros and cons of each option before committing to any long-term decision.

Nevertheless, the vast majority of debt-ridden Canadians will find that consumer proposals are the smarter option.

Here’s why:

Payment Expectations

While credit counseling can negotiate frozen interest rates, the actual debt needs to be repaid to 100%.

Conversely, consumer proposals regularly secure reductions of 70-80%, allowing you to lift a significant weight from your shoulders.

Interest is automatically frozen by law too, even on student debts and tax debts.

The consumer proposal must also avoid any risk of placing you under financial hardship, meaning your income and family will be taken into account during negotiations with creditors.


When using credit counseling, five-year agreements are the most common.

While consumer proposals can split payments over this extended timeframe, the majority of repayment plans are between two years and four years.

Due to the significantly reduced payment costs, you can still avoid paying excessive monthly premiums.

While R7 credit ratings will affect you for three years after completion (compared to two years with credit counseling), the faster payments will compensate for this factor.

Easier Agreements

A credit counseling service needs to negotiate with each creditor.

So, if one of them rejects the proposal, you will still have to settle that debt separately.

Conversely, when consumer proposals are agreed by creditors totaling at least 50% of the overall debt, all other creditors are legally committed to accept the proposal too.

Even though you don’t need to handle the negotiations, it allows you to enjoy greater transparency throughout the process while you are guaranteed to see all debts roll into one.

Quality Guarantees

Perhaps the biggest worry in relation to credit counseling is that anyone can provide this service.

There are no set qualifications or governing bodies involved.

Crucially, no defined dispute resolution practices are in place.

When choosing consumer proposals, only licensed Trustees can handle your case and financial obligations.

All aspects of the debt relief service will be handled in the right way, meeting the Code of Ethics for professional conduct.

If nothing else, this should provide peace of mind.

Start The Road To Recovery Today

To learn more about consumer proposals and all other forms of debt relief, get in touch with Bankruptcy Canada today.

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal

Gordon Sands

Please post a follow up comment below:

(Note: Comments are reviewed before posting.)