Credit Counseling Versus Consumer Proposals
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.
Most people view personal bankruptcy as a last resort and will turn to a qualified credit counselor for help. No one wants to experience the embarrassment of filing for bankruptcy as well as all the future problems that come with having this stigma on your record. Many counselors do not realize that there is a much more effective option for their clients. This option, known as The Consumer Proposal, gets scant publicity and is almost unknown to most people who are struggling with personal debt. Below we will review the important points and options of the Consumer Proposal. We’ll also look at how a counseling service can help consumers implement a Consumer Proposal.
There are a number of agencies that offer credit counseling. These agencies are comprised of ones that are non-profit as well as for profit companies. You can expect both types of agencies to charge a fee for their services. The goal with any credit counseling is to create a viable Debt Management Plan. Then your counselor will offer this plan to all of your creditors, with the goal being to work out a plan that will help both sides. This plan will not include any debt that is secured. This could include a home mortgage or an automobile loan.
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.
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.
With a Consumer Proposal, you can actually negotiate a reduction in the total amount you owe, reducing that $30,000 in debt to $15,000 and perhaps lower. In addition, Consumer Proposals afford legal protection unavailable with a DMP. If your wages are already under garnishment the law specifies it must stop under a Consumer Proposal while cessation of garnishment under a DMP is at the voluntary discretion of the creditor.
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.