Which is Better Consumer Proposals or Debt Consolidation?

Which is Better Consumer Proposals or Debt Consolidation?

A common question is the difference between debt consolidation and a consumer proposal. What are the benefits of each? When you should choose?

When it comes to making a choice, it is important to understand that each person's financial situation is different and how your decision will impact achieving your long-term financial goals.

Consumer Proposals vs. Debt Consolidation

Here are a few facts about Consumer Proposals that you may not know:

• Consumer proposals can significantly reduce your overall debt.

• No further interest accrues on most debts.

• There is an immediate stay of proceedings from your creditors’ collection activities.

• Can include government debt such as income taxes and student loans.

• Can be an excellent consolidation tool if you cannot afford to pay your debt in full and can commit to payment terms.

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• You can deal with your debt without impacting assets. However, if you want to, you have the option of offering an asset as part of the proposal.

• You avoid bankruptcy.

• Creditors vote on whether they will accept the proposal offered and can make counterproposals if they want a higher amount. A majority in dollar value voting in favour will cause the proposal to be accepted.

• Once creditors accept the terms, it is deemed to be approved by the court fifteen days later. On very rare occasions, a creditor can request the consumer proposal be approved by the court.

• Can include government debt such as income taxes and student loans (some restrictions apply).

• Will be noted on the credit bureau for a period of three years after you complete your payments or six years from the date of filing, whichever comes first.

Another option that people often consider is Debt Consolidation when they are faced with numerous debts, often with high interest. When considering this option, it is important to know exactly what you are agreeing to.

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Here are some facts about Debt Consolidation:

• Debt Consolidation is a way to combine all of your debt into one payment at a lower interest rate.

• In some cases, the financial institution will look to obtain security for their loan or a co-signer if your credit rating is low.

• If your debt to income ratio is too high, the financial institution may decline to consolidate any or all of your debt into one payment.

• If you do not qualify for a consolidation loan through a regular bank or credit union, it may be temping to obtain a loan through a high interest financing company, but that comes with its own set of issues including interest rates that exceed 30%.

Obtaining a consolidation loan frees up your credit card balances and thus tempting you to get into even more debt.


If you are overwhelmed with debt a consumer proposal may be the best option for you to deal with your debts in the shortest amount of time.

Talk to a professional at D. Thode & Associates Inc. today who can help you navigate these options and more.

Your first consultation is always free.

Office Locations & Service Areas

BC Interior - Kelowna, Kamloops, Penticton

Lower Mainland - Vancouver, Burnaby, Surrey, Chilliwack

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