Economies worldwide and especially industrialized Western economies have experienced one of the worst tailspins since the Great Depression. Signs of an economic recovery are starting to appear but as this recovery takes hold, many consumers are finding themselves in serious financial straits. For them the situation is dire. The one thing they need is a constructive plan to manage their debt, and expert advice on managing their finances during the process.
Many people think in terms of bankruptcy in Calgary 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.
A Consumer Proposal is a concept whereby a credit counselor approaches your creditors with the intention of getting them to lower the percentage of interest you currently pay and waive any late fees that may have been added on to your account. In return you agree to a payment plan that is more manageable. You will make these payments to the credit counseling service and they will pay your creditors. All credit accounts that you currently have will be closed.
Some debt may be so large that it will restrict you from qualifying for credit counseling. There are differences that you need to understand when it comes to a Debt Management Plan or a Consumer Proposal. It’s important to know the differences before you call a credit counseling service.
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.
A bankruptcy trustee can handle a Consumer Proposal. They must be licensed as this is a legal agreement that is binding in a court of law. The government requires that consumers use their services in order to file a Consumer Proposal. Consumers need to understand that a bankruptcy trustee is experienced in handling many aspects of debt management.
Bankruptcy trustees are trained professionals and are skilled in debt management. They will evaluate your finances and explain the many options that are available to you. They fully understand and know how to implement Consumer Proposals and Debt Management Plans. Most offer a free consultation and it is in your best interests to consult with one in order to proceed with a plan that best suits your needs.