A Guide to Debt Management
Managing Debt in Canada
Owing money is stressful, which is why finding the right repayment strategy to escape debt in the fastest time.
A Debt Management Plan, otherwise known as a DMP, could be the perfect solution.
Bankruptcy Canada can support you through the process, but you must first try to familiarize yourself with the programs to confirm that it’s the right choice for you.
Debt Management Plans Explained
The term DMP describes a financial management strategy that is offered by credit counsellors.
It focuses on the concept of consolidating all debts into one, allowing you to repay your debts over a period of up to five years.
Once the DMP is in place, you will be required to make a single monthly payment to the credit counsellor, who then distributes the money to the various creditors using the appropriate proportions.
Before this happens, though, the counsellor needs to ensure that this is a viable and suitable solution for you.
For a DMP to be considered the right option, the following criteria questions must be asked;
- Are you in significant, unmanageable debt that is spread across multiple creditors?
- Are creditors likely to accept the five-year repayment proposal?
- If the DMP is confirmed, will you be able to meet the monthly repayment?
Assuming that you are deemed a good candidate for a DMP program, you will simply be responsible for interacting with the credit counsellor to make the agreed monthly payment.
After doing this for the repayment period, which could be shorter than the five-year maximum depending on the circumstances, you will be debt-free as all creditors will have been paid.
What Are The Advantages Of a Debt Management Plan?
At a glance, the idea of a Debt Management Plan may not sound too different from the situation you’re currently in.
After all, you are still required to satisfy all creditors by paying back the money you owe.
However, as anybody faced with spiraling debts from multiple creditors will know, juggling the debts with other life commitments is often the most stressful challenge of all.
DMPs remove this problem by consolidating all debts into one monthly repayment.
The benefits of DMP schemes do not end there, though.
Additional positives include, but are not limited to:
- Reduce or freeze interest payments. The credit counsellor will negotiate with creditors on your behalf. The outcome is that creditors get back the money they lent (or to the value of the item sold) while you avoid the interest costs that would usually increase the overall payment.
- Set out a clear path to financial freedom. The feeling that you are falling deeper into debt is a horrible thing. A DMP provides clarity that enables you to track progress while also setting your sights on a clear date for when you will be free from debt.
- Gain peace of mind. The knowledge that an experienced credit counsellor has found the most effective way to settle your debts without resorting to bankruptcy can provide confidence. Crucially, it ensures that your finances are back on the right track.
The credit counsellor can do a lot of work on your behalf during this process.
From building proposals and negotiating with creditors to managing the appropriate distribution of your finances, keeping those issues under control can work wonders for your long-term financial situation.
Why Choose DMPs Over Consumer Proposals?
If you are familiar with the concept of Consumer Proposals, you will be forgiven for thinking that the DMP sounds very similar.
The two financial schemes share a lot of key attributes, such as:
- They both consolidate your debts into one monthly repayment.
- They each look to reduce your interest payments to save money.
- They both look to clear your debts in a set timeframe.
However, there are plenty of differences.
While a Consumer Proposal can offer the additional benefit of reducing the size of your debt, it is also a process that must go through the courts.
The financial repercussions, not least for your credit report, can be far greater too.
So, if your financial situation allows it, the Debt Management Plan is usually a far better starting point.
Finding Out More About Debt Management Plans
Under the right circumstances, DMPs are a useful tool that can help you clear your debts far sooner and with reduced overall payments.
Better still, the easier management and defined path to financial freedom can help you build for a brighter future with almost immediate results.
For the best results, though, you must partner with the right financial advisor.
For more information or to arrange a consultation, call Bankruptcy Canada today on (877) 879-4770 today.