Consumer Proposals Versus Credit Counseling

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. 

 

Credit counselors and filing for  bankruptcy in Calgary are two of the most common options that people tend to think of when it comes to unmanageable debt. Radio and television commercials are filled with companies offering assistance with filing for bankruptcy. There’s also been a significant increase in commercials that offer the services of a professional credit counselor.

 

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.

 

Agencies that offer credit counseling are comprised of ones that are for profit as well as ones that are non-profit. Both types of agencies will charge a fee for their services. You can expect them to formulate a Debt Management Plan that meets with your approval. They will then present the plan to your creditors. This will not include creditors that have secured their loan. These usually include home mortgages and loans on an automobile.

 

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.

 

It’s important to understand that you must qualify for credit counseling. The amount of debt you have will be a determining factor in whether or not you qualify. A credit counseling service will be able to advise you on whether or not your debts are within the qualifying ranges. It’s important to know and understand the differences in a Consumer Proposal and a Debt Management Plan, before calling the 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.

 

A Consumer Proposal benefits the client by allowing the credit counseling service to negotiate with your creditors for a reduction in the amount you currently owe. The percentage that it can be lowered will differ depending on many factors. If your wages are currently being garnished, then by law this must stop. With a Debt Management Plan lifting a garnishment will be at the sole discretion of your creditors.

With a Consumer Proposal, the government mandates that the client must use a bankruptcy trustee who is licensed, as this will be a binding legal agreement. It’s important for consumers to understand that a bankruptcy trustee can be used for a number of different functions, with bankruptcy being just one of their services.

Bankruptcy trustees are familiar with every aspect of Consumer Proposals as well as Debt Management Plans. These professionals can review your current financial situation and help you to understand the complexities of the two options available to you. There is usually no charge for a consultation and any consumer considering the two plans should avail themselves of this free advice. If nothing else the consumer will gain a better understanding of their options.

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