Consumer proposal vs credit counselling in Canada

Credit counselling is broader than a repayment plan

A conversation with a credit counsellor may help you organise a budget and understand your finances. A debt management plan, or DMP, is a separate arrangement that the counsellor may propose to creditors. You can seek information without assuming that enrolling in a plan is your next step.

The FCAC explains credit counselling and debt management plans. A consumer proposal is a formal insolvency option administered by an LIT. Comparing the two starts with the service you actually need: budgeting support, a voluntary repayment arrangement or an assessment of legal debt relief.

Compare the arrangements side by side

Use the OSB comparison as an independent reference and request the actual terms of any arrangement you are considering.

Look for the amount left outside the plan

A single payment can be convenient, but it may not be your only debt payment. Put the proposed plan beside your full debt list and mark which accounts are included, which are excluded and which creditors have yet to agree.

Then add the excluded obligations to your household budget. A quoted plan payment that looks manageable on its own may become difficult when a vehicle loan, support payment or other balance is added. Ask for a clear written response about each account rather than relying on a general statement that your debts will be consolidated.

Ask what you are paying for

Request a breakdown of initial and ongoing charges from the credit counselling provider. Ask whether fees can change, what happens if you leave the plan, and how your payments will be reported to you. Interest savings and service costs should be considered together.

For a proposal illustration, ask the LIT to explain the total amount payable and the fees included within it. Be cautious about paying a separate adviser just to reach an LIT. The OSB explains how to avoid unnecessary debt-advice fees.

Neither a non-profit label nor a polished website answers these questions by itself. Understand the proposed service, the people providing it and the written agreement.

Credit consequences need their own comparison

Do not treat an informal repayment arrangement as automatically invisible to credit bureaus. Ask the provider what information will be reported and how completion is recorded. The FCAC states that debt management plan information is removed two years after the debts are paid off; its credit-report guidance also explains consumer proposal records.

That record is one part of a wider credit history. Avoid promises of a specific score increase or a guaranteed borrowing date. Keep completion documents and check each bureau's report when your circumstances change.

Questions before you agree to either route

• Am I receiving advice only, or enrolling in a repayment arrangement?
• Which creditors and balances are included, and which remain outside?
• What is the total payable, including every fee?
• What happens if one creditor refuses or resumes collection?
• How would a missed payment affect the arrangement?
• What documents will confirm that I have completed it?
• Which other options have been considered using the same budget?

You can speak with a credit counsellor and an LIT while gathering information. An LIT assessment should consider non-insolvency options too. ConsumerProposal.ca is an educational publisher, not either type of professional provider. Our LIT guide links directly to the official licence directory.