Comparison Of Consumer Proposals And Credit Counseling

Economies worldwide and especially industrialized Western economies have experienced one of the worst tailspins since the Great Depression. Signs of an economic recovery are starting to appear but as this recovery takes hold, many consumers are finding themselves in serious financial straits. For them the situation is dire. The one thing they need is a constructive plan to manage their debt, and expert advice on managing their finances during the process.

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.

No one wants to go through the pain of personal bankruptcy or the stigma that is attached to it. Personal bankruptcy can affect you for years. Agencies that specialize in credit counseling are often unaware of another option that is available to their clients. Due to a lack of publicity, few know of it and even fewer credit counselors offer it as an effective alternative for their clients to implement. A good credit counselor will understand this option and will educate clients on how to utilize the option of a Consumer Proposal. Its use and benefits are discussed below.

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.

The idea behind the plan is fairly simple.  The credit counselor gets your creditors to agree to lower their interest rates and waive late fees you might have acquired in exchange for a managed repayment schedule.  Your credit accounts are closed and you will pay a single, much lower, monthly payment directly to the counseling service who in turn pays the creditors.

Some debt may be so large that it will restrict you from qualifying for credit counseling. There are differences that you need to understand when it comes to a Debt Management Plan or a Consumer Proposal. It’s important to know the differences before you call a credit 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.

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.

In fact, they are highly trained professional debt advisors who can help you evaluate your current financial situation and walk you through all of the available debt solution options, including both Debt Management Plans and Consumer Proposals.  The initial consultation is free so why not do yourself a favor and give one a call.  You have nothing to lose but a little time and everything to gain.

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