Creditor Protection in a Consumer Proposal vs. Debt Management Plan

Creditor Protection in a Consumer Proposal vs. Debt Management PlanWhen it comes to dealing with debt, individuals often look for the most effective solutions to clear their financial obligations and attain a fresh start. However, choosing the right debt relief option involves considering various factors such as financial capability, the nature of the debt, and the type of creditor protection required. The two main strategies that debtors often consider are the Consumer Proposal and the Debt Management Plan.

Debt Management Plan

A Debt Management Plan (DMP) is a proactive approach adopted by individuals to handle relatively small debts. If the total liability is owed to a few creditors and is of a small monetary value, a DMP could be an ideal solution.

How it works

DMPs work by consolidating all existing debts into a single pool, typically with little or no interest charges. The debtor then makes monthly payments over a period of four years. This plan can be a suitable route for those who can afford to repay their debts but have difficulty covering the interest.


However, DMPs are entirely voluntary and not legally binding. This means that creditors can choose whether to participate or not. Therefore, if the debtor needs creditor protection, a DMP may not be the best choice.

Consumer Proposal


If the debtor’s financial obligations exceed their repayment capability, a Consumer Proposal might be a better alternative. This option is particularly suitable for those whose debts are higher than $10,000.

How it works

Unlike a DMP, a Consumer Proposal is legally binding and can only be filed through a Licensed Insolvency Trustee. This is a debt settlement solution where the debtor repays a fraction of their total debt over a maximum period of five years. The debtor can also increase their payments and pay off their proposal ahead of time.


A significant benefit of a Consumer Proposal is the stay of proceedings, which can halt wage garnishments, legal actions, and collection calls. Also, once the proposal is accepted, it becomes a legally binding contract, forcing all creditors to adhere to it.

Key Takeaways

The primary distinctions between a Debt Management Plan and a Consumer Proposal include:

  • Consumer Proposals are legally binding on creditors, while DMPs are voluntary.
  • Filing a Consumer Proposal can stop wage garnishment or other creditor actions, whereas DMPs do not offer such protection.
  • Consumer Proposals reduce the total debt amount, while in a DMP, the debtor must repay everything they owe.
  • The monthly payment in a Consumer Proposal is typically much less than that in a DMP.


Navigating through overwhelming debt can be a daunting task. Understanding the benefits and limitations of each option is crucial in making the right decision. A Licensed Insolvency Trustee can provide professional advice and guidance on the best course of action to take.

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