Consumer Proposal vs Debt Settlement

Table of Contents

Consumer Proposal vs Debt Settlement: Differences

The differences between a consumer proposal and a ‘debt settlement’ are significant.

Knowing, and understanding the differences can save you thousands of dollars and months of unnecessary stress.

Consumer Proposals

Consumer proposals are legally binding agreements between debtors and their unsecured creditors, that are filed with the government and managed by federally licensed Trustees in Bankruptcy, such as David Sklar & Associates. All fees and procedures are set and overseen by the Bankruptcy and Insolvency Act and the Office of the Superintendent of Bankruptcy.

Creditors usually agree to a consumer proposal, because they will receive less if the debtor takes the next step and goes into bankruptcy.

If a majority of creditors (in terms of debt owed) approve a consumer proposal, then any creditors who voted against it, are required, by law, to honour the terms of the proposal.

In a consumer proposal, creditors agree to accept a reduced repayment of the debts that are owed to them, to stop all interest charges, and to stop all collection efforts. The debtors, agree to repay the creditors set amounts (usually in monthly payments), for a period of up to 5 years, and to attend credit counselling. The funds are paid into the trustee who holds them in a legal trust and distributes them to the creditors as agreed to in the proposal.

At the successful completion of the consumer proposal, the debtor is legally released from the debts covered in their proposal with a discharge.

Debt Settlements

The Ontario Ministry of Consumer Services has issued a Consumer Alert about Debt Settlement that advises caution and warns of such practices as misleading contracts, pressured sales, excessive fees, and perhaps most importantly – the failure to actually get the debts reduced.

Both Manitoba and Alberta have passed legislation to protect consumers from debt settlement companies.

The ‘debt settlement companies’ we are discussing are the unlicensed organizations who promise to negotiate a settlement with creditors, require a substantial upfront payment, and frequently leave their clients in far worse financial shape.

To be clear: the ‘debt settlements’ we are discussing are not the ‘debt management programs’ that are available through non-profit, licensed counsellors for solvent debtors.

Normally, a debt settlement company with tell their clients to stop paying their creditors, and send the money they would have paid, to the debt settlement company instead. Once the substantial settlement company’s fees have been paid up front, and significant funds have built up (a process that can literally take years) – the debt settlement company will then contact the creditors to see if they can cut a deal.

The pitch is, the credit companies will be so glad to get any money after such a long time without payment, they will be willing to settle.

The reality is, the credit companies will continue to call for their money and may take legal action. They are under no obligation to negotiate.

Use Caution – And Get All the Facts

If You Are in Serious Debt Trouble

If you live in the Toronto area and are in overwhelming debt, call the caring, licensed professionals at David Sklar & Associates at 416-498-9200 for a Free, confidential consultation. During your consultation, we will go over your financial situation, and discuss all of the options you have for getting out of debt and getting on with your life.

 

Take Your First Step Towards A Debt Free Life

If you are overwhelmed by debt, call us at 1-844-962-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you. 

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Very processional and understanding of my situation. Thanks to all your team.
Luc Valade
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Jennifer Norton's exceptional assistance with my consumer proposal was life-changing. Her professionalism, expertise, and dedication were evident from the start. Jennifer's thorough explanations and attention to detail created a tailored proposal that set a clear path to financial freedom. She went above and beyond, advocating for my best interests and providing invaluable support. Thanks to Jennifer, I'm on track to a stress-free financial future. I wholeheartedly recommend her – she's not just a financial expert; she's a life-changer. Thank you, Jennifer!
Thomas
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They made a difficult situation, easy thank you.
Ray Barkley
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I had a great experience with Christine from David Sklar & associates. Very professional, and easy to get through. Thank you
fukinwith doug
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Great customer service and a smooth process to get your finances on track. Informative and thorough.
Adrian Downey
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From the moment I sat down in the office, I felt welcome and at ease. Grace Cuffaro was both friendly and highly informative. She is extremely knowledgeable and answered all of my questions in detail, making sure I understood before moving on. I was reassured throughout the process that I was making the right decision and that it was not uncommon nor anything to be ashamed of. I didn't expect my appointments to be such positive experiences, but that's exactly what they've been!
P Bains
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I was in a tough financial position and found myself searching for relief. I came across David Sklar & Associates page when doing my research on financial advice. The reviews were amazing, but I was concern because I didn’t know what to expect. I made the decision to set up a consultation and had the pleasure to meet with Jennifer Norton. Right from the beginning, she was attentive, knowledgeable, and pleasant to meet with. The experience was painless and very educational. Jennifer made sure I understood my choices, answered my questions, and concerns promptly, in person, over the phone and via email. I’ve been working with Jennifer for a couple months now and I am pleased that Jennifer is the manager handling my file. I would and have recommend Jennifer Norton, David Sklar & Associates to anyone in need of direction regarding finances.
A.L Thompson-Lawrence
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I had my first meeting with Jennifer, she was really understanding and extremely helpful, and got everything done in a timely manner.
Tamas Wint
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Jennifer Norton has been the most helpful throughout this truly embarrassing situation that I find myself in. She is informative, understanding, and there is absolutely no judgment. She has handled everything in a very professional and respectful manner and I am SO glad that I have them on my side. Definitely a huge weight off my shoulders.
Jody T
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Rhoda, Jerry, and the entire David Sklar & Associates Staff were very professional and were great to work with. They taught me a lot regarding financing and I would recommend them to anyone facing financial troubles as well. Rafael L
Medanun
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