A few things to keep in mind
- Use a complete budget and debt list for every comparison.
- Ask what is voluntary, contractual or part of a formal legal process.
- Compare what happens if a plan becomes unaffordable.
Begin with what needs to change
An alternative is useful only if it addresses the actual problem. A temporary interruption in income, a high interest cost and a lasting gap between income and essential needs may call for different conversations. Prepare your debt inventory and current budget before comparing solutions.
The Office of the Superintendent of Bankruptcy's comparison of debt solutions outlines the differences between formal and informal approaches. Use it as a starting point for questions. It cannot establish which approach is affordable or suitable for your individual circumstances.
Ask creditors about a workable arrangement
Depending on the situation, a creditor may discuss a payment arrangement or other change. Ask what is offered, whether interest or fees continue, how long the arrangement lasts and what happens if a payment is missed. Keep the terms in writing.
Do not treat a request as an accepted agreement. Until a change is confirmed, the original obligation may remain relevant. If several creditors are involved, check whether separate arrangements can all fit within the same budget rather than assessing each in isolation.
Understand what a counselling plan would require
Credit counselling can help with budgeting and may include discussion of a debt management plan. The FCAC's guidance on finding help with debt explains questions to ask about organizations, costs and plans. A nonprofit label does not by itself answer every question about fees or services.
Ask which creditors and debts would participate, what the full payment commitment would be and what happens if the plan does not proceed as expected. Clarify the legal effect instead of assuming an informal plan provides the same protection as a formal insolvency filing.
Test consolidation beyond the monthly payment
A consolidation loan changes the way debt is financed; it does not automatically solve an underlying income shortfall. Compare the rate, fees, repayment term, total cost and whether property or another person's guarantee is required. A lower monthly payment can come with other trade-offs.
Ask how existing accounts would be handled and whether the new payment fits alongside essential costs. If the plan only works by continuing to borrow for ordinary expenses, bring that concern into the assessment.
Discuss a consumer proposal with a trustee
A consumer proposal is a formal insolvency option administered by a Licensed Insolvency Trustee. Ask the trustee to compare it with bankruptcy using your actual debts, assets and income. The OSB's consumer information explains the formal options and trustee role.
Questions should cover eligibility, proposed obligations, creditor consideration, costs and what happens if circumstances change. Avoid choosing from an advertised payment example that does not describe your file. A useful comparison leaves you understanding both the obligations you would accept and the uncertainties that remain.
Follow the information further
Sources and support
- OSB: Compare debt solutions
Differences between DMP, proposal and bankruptcy; assets, income, fees and duties require individual comparison.
- FCAC: Getting help from a credit counsellor
Counsellor selection, costs, informal plans and creditor participation; no universal free-service claim.
- OSB: Consumed by debt
Consumer insolvency overview, LIT role, preparation for meeting and comparison of formal options.
This is general educational information for Canadian readers. Your own facts and the applicable rules matter; ask a qualified professional about your situation.