Credit Counselling & Debt Management Plans. Right Solution?
If you are struggling with what you feel as though is unmanageable debt or if you have multiple creditors, then you will know that it is very stressful just trying to find out what you owe.
It’s even more stressful trying to prioritise and keep track of every payment as well.
This is especially the case when you look at the unexpected payments and life events that might come your way.
The good news is that there are so many programs and services out there that you can use to try and make your payments more efficient.
What is a Debt Management Plan?
A debt management plan is ultimately a process which is offered by a credit counsellor.
They will then consolidate any unsecured debts that you have into a single monthly payment.
This will significantly reduce or freeze your interest rate, so you are free to repay what you can up to a period of five years.
Your monthly payment will be sent to the counsellor who will then distribute any of the funds to the creditors until you are able to repay the debt.
How does a Debt Management Plan Work?
During your meeting with a creditor, they will work with you to make sure that all of your debts are reviewed and that you are given a great deal of support with your financial situation.
They will also help you to find out if you are a good candidate for a debt management plan, and whether or not the creditors you are working with right now are likely to accept this.
They can also help you by talking you through what you can afford so that you can get some financial relief overall.
If you do decide to go ahead with your proposal, then your counsellor will get in touch with your creditors and they will negotiate a settlement that will both meet your needs as well as satisfying your creditors.
This may take a bit of back and forth to make sure that everyone is on board, but either way, when you have your plan in place you will be able to feel much more comfortable with the process.
The Benefits of a Debt Management Plan
There really are so many benefits of having a debt management plan.
Some of them include the fact that you will just make a single monthly payment.
You won’t have to prioritise or juggle so many debt payments and you won’t have to worry about interest charges or due dates either.
You will pay less interest too.
Sometimes it is possible for you to negotiate with your creditors so that you will pay less interest in return for them receiving the money they need.
Lastly, a credit counsellor can give you so many helpful tips and insights.
This will give you the support you need throughout your debt management plan.
They can also work on your behalf to make sure that you get the best possible deal in terms of your creditors.
Debt Management or a Consumer Proposal?
If you don’t think that a debt management plan is going to fit within your budget, then you may need to seek financial assistance from a Licensed Insolvency Trustee.
They are a practitioner who can administer a Consumer Proposal.
Debt management plans and consumer proposals are very similar as they both reduce interest and they provide you with a single monthly payment.
You will also have a very clear and supported path to financial freedom overall.
There are some differences between a consumer proposal and a debt management plan.
With a consumer proposal, it’s a court-ordered process.
Once the majority of your creditors agree to the proposal, it will then be sent to the Court.
They will ratify the contract between you and your creditors.
A consumer proposal gives you the ability to compromise on the debt that you have.
When you look at a DMP plan, you will need to pay the outstanding balance in full.
Creditors and collectors are not allowed to contact you.
Creditors will not be allowed to initiate any new collection action against you and there is also a stay of proceedings as well which means that you will be protected against wage garnishment.
If you owe money for an unsecured debt and you are not able to meet any of your monthly repayments, then a debt management plan may be a very good solution if you want to get the financial fresh start you need.
The great thing about this process is that it can help you to alleviate the cost of high-burden interest debt and it can also give you a clear timeframe so you can reach your goals properly.
If you don’t think that a debt management plan is going to fit in with the circumstances you have, then you may want to look into a consumer proposal.
This is an option that will help you to consolidate all of your monthly debts into a single payment.
This is the best way for you to make sure that everything fits in with your budget.
If you go through a Licensed Insolvency Trustee then they will be able to offer you a free consultation where you can review all of your finances and you can also understand your goals too.
This is a great way for you to find out what options you have.
If you need help with the debt that you have then the best thing that you can do is contact Bankruptcy Canada.
When you do, we can then talk you through the options that you have, and we can also work with you to make sure that your debts are manageable.
Our professionals have years of experience in the industry and we are very proud to say that we offer the highest level of support from start to finish.
If you want to find out more about our team or how we can help you then please do get in touch with us today.
You can contact us by phone or by email.