Much of the Western industrialized world has gone into an economic tailspin from which we are only beginning to recover. As a consequence, more and more consumers find themselves in dire financial straits and are looking for ways to help manage their debt load.
Many people think in terms of Calgary bankruptcy as a solution or they may seek out a credit counseling expert to help them resolve their problems. Daily they are bombarded with television and radio commercials promoting assistance with filing for bankruptcy, as well as offers of credit counseling, as a way to help them manage their debt load.
No one wants to go through the pain of personal bankruptcy or the stigma that is attached to it. Personal bankruptcy can affect you for years. Agencies that specialize in credit counseling are often unaware of another option that is available to their clients. Due to a lack of publicity, few know of it and even fewer credit counselors offer it as an effective alternative for their clients to implement. A good credit counselor will understand this option and will educate clients on how to utilize the option of a Consumer Proposal. Its use and benefits are discussed below.
Credit counseling assistance is offered through both for-profit companies and not-for-profit agencies. Both charge fees for what they do. The end result of working with a credit counselor is the preparation of a Debt Management Plan, which the credit counselors present to your creditors. These plans only apply to your unsecured debt, not to secured debt like car loans and home mortgages.
The idea behind the plan is fairly simple. The credit counselor gets your creditors to agree to lower their interest rates and waive late fees you might have acquired in exchange for a managed repayment schedule. Your credit accounts are closed and you will pay a single, much lower, monthly payment directly to the counseling service who in turn pays the creditors.
Not everyone qualifies for credit counseling. There are limits on how much debt can be included in the plan based on a maximum repayment period. To see if you qualify, you could contact a counseling service. Before you do, however, you should be aware of the differences between the Debt Management Plan and the little known Consumer Proposal.
First, a DMP (Debt Management Plan) does not lower your total debt; it just restructures the repayment in a more manageable way for the consumer. If you owe $30,000 in unsecured debt, you will pay all that back over time plus the accumulated fees for the credit counseling service, which varies.
When you choose a Consumer Proposal, your credit counseling service will negotiate with your creditors on your behalf. Their goal will be to reduce the amount owed by you to your creditors. If your wages have been garnished then by law this must stop. This is one of the main differences between the two plans. With a Debt Management Plan your wages can still continue to be garnished, and it will be at the discretion of your creditors whether to remove it or leave it in place.
Since a Consumer Proposal is a binding legal agreement the government requires consumers to secure the services of a licensed professional bankruptcy trustee to file one. Unfortunately, some consumers who are aware of the existence of bankruptcy trustees avoid talking to them, thinking they only handle bankruptcies.
In fact, they are highly trained professional debt advisors who can help you evaluate your current financial situation and walk you through all of the available debt solution options, including both Debt Management Plans and Consumer Proposals. The initial consultation is free so why not do yourself a favor and give one a call. You have nothing to lose but a little time and everything to gain.
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