The Intricacies of Debt Management and Debt Settlement Services
In the financial world, there is a host of companies that claim to provide ‘Debt Management Services’. Essentially, they propose to negotiate a settlement with your numerous unsecured creditors on your behalf, eliminating the need for a formal Consumer Proposal process. Each of these companies functions differently, but their programs typically include some or all of the following elements:
Proceed with Caution
When contemplating employing the assistance of a debt management firm, it’s crucial to realize that this industry is generally under-regulated and unlicensed, though some provinces are now implementing legislation to regulate it.
Moreover, these firms cannot prevent creditors from taking further collection action against you until a settlement is reached. Unlike bankruptcy or a Consumer Proposal, there is no stay of proceedings, which means you might still receive phone calls or even have your wages garnished.
Considerations before Engaging a Debt Management Company
If you’re thinking about using the services of a debt management company, make sure that:
- You’ve evaluated all your alternatives.
If you’re uncertain about what other options exist or whether a debt management firm is the right choice for your unique situation, consult with a licensed professional. Bankruptcy Canada, for instance, offers free, non-binding consultations to discuss all your options. - You comprehend the fees and costs associated with the debt management process.
As previously stated, the debt management industry is largely unregulated. Be cautious of organizations that charge a substantial fee on top of the debt you already owe. - You understand what will happen while the debt management company (or you) gathers the funds to try to settle with creditors.
The debt management firm will attempt to negotiate lower payments, lower interest, and/or a longer period to repay your debt – however, none of these actions are guaranteed. - You have verified the credentials of the debt management company you’re considering.
Begin your research by examining online reviews of the company you’re considering, including the Better Business Bureau (BBB). If there’s an official registry in your province, check to see if the debt management company is registered with them. - You comprehend the implications on your credit rating of using such a firm.
Participating in a debt management plan may make it more difficult for you to obtain new credit in the future – especially if you’re unable to keep up with the negotiated repayment terms. If you’d like to learn more about debt management companies and all of the debt relief options available to you, please contact your nearest Bankruptcy Canada office to schedule an appointment.
