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A Consumer Proposal is a formal process legislated by the federal government which allows honest and unfortunate debtors to gain relief from their debts. Administered by a Licensed Insolvency Trustee, the process involves coordinating with all creditors to determine a reasonable debt settlement which is generally less than the full amount owed. The debtor will pay into this settlement with monthly installments over a specified timeframe (typically to a maximum of five years).

For a Consumer Proposal to be accepted, more than half of the creditors (by dollar value) must agree to the terms presented by the Licensed Insolvency Trustee. Upon achieving a majority vote, all creditors are bound to the terms of the agreement. Provided the debtor meets these terms through the duration of their Consumer Proposal, they will gain a fresh start and become debt free following their final payment.

Another critical benefit of the Consumer Proposal process is that it suspends all current collections activity and, provided the debtor continues to meet their obligations, prevents creditors from pursuing future collections actions – allowing them to focus on eliminating their debt and rebuilding their financial life.

Personal bankruptcy is a formal process legislated by the federal government which allows honest and unfortunate debtors to gain relief from their debts. Administered by a Licensed Insolvency Trustee, bankruptcy may require the debtor to give up some of their non-exempt assets, and possibly some of their income for a while, to help repay a portion of their debts. The total value of this repayment is generally lower than the total value of the outstanding debts.

Following a prescribed timeframe (generally between nine and 21 months for a first-time bankrupt) and once the debtor has completed certain requirements, they will receive a discharge from their bankruptcy and a fresh start, debt free.

Another critical benefit of the bankruptcy process is that it suspends all current collections activity and, provided the debtor continues to meet their obligations, prevents creditors from pursuing future collections actions – allowing them to focus on eliminating their debt and rebuilding their financial life.

Orderly payment of debts (OPD) is a formal process legislated by the provincial governments of Alberta, Saskatchewan and Nova Scotia. Administered by provincial credit counselors, the process involves applying to the courts to consolidate all outstanding unsecured debts into a single monthly payment which is determined by the courts and payable for up to three years at an interest rate of five percent.

Unlike personal bankruptcy or a Consumer Proposal, ODP still requires the debtor to repay the full value of their outstanding debts (plus interest) and does not cease or prevent any current or future collections action. This option may be most beneficial to debtors who are struggling with large high-interest rate debts, such as credit cards, and are able to pay the full value of their debts at the reduced interest rate within the three-year term.

A debt management plan (DMP) is an informal process intended to improve your ability to repay your debts. Administered by credit counselors, the terms of your DMP will vary depending on your unique needs, but could include:

• Reduced interest rates
• Partial debt forgiveness
• Fixed monthly payments over a specified term

Importantly, the terms of a DMP are not legally binding, will not always include all of your creditors, and a DMP may not prevent any current or future collection action. The DMP option can be beneficial for debtors with a few smaller-sized debts that they are able to pay in full within the agreed-upon timeframe (generally less than five years).

Depending on a debtor's unique situation, it may be possible to repay the full value of their outstanding debts faster without requiring a formal or informal debt solution.

Licensed Insolvency Trustees, credit counselors and financial planners can all provide valuable budgeting and money management assistance to help debtors streamline their monthly expenses and contribute more money to the principal value of their debts each month. They can also provide resources and insights regarding different debt repayment strategies, such as the "debt snowball" and "highest interest rate first" to suit an individual's needs and goals.