Aside from offering help with money management (setting up a budget) and debt counselling (a discussion of your financial options), the main service offered by most credit counselling firms is a debt management plan. This is a monthly repayment plan that the counsellor arranges on your behalf with your creditors.
Essentially, it’s an informal proposal—with the key word being informal. In legal terms, that means that it’s not enforceable by law. Your creditors can choose whether or not to participate, and they can back out anytime. They can also continue with or take legal action against you, and collection agencies can keep harassing you.
Compare this to a formal consumer proposal, and it may not be the best route to take. Here’s how the two options measure up:
Debt Management Plan,Formal Consumer Proposal
Administrator requires no special training or certification,Must be administered by a licensed trustee
Offers no protection from creditors: creditors can still take legal action against you and collection calls can continue.,Protects you from any further action by creditors. Collection calls must stop.
Creditor participation is voluntary: creditors can change their minds & back out anytime,”One the proposal has been approved , it is legally binding on all creditors involved”
Interest charges may continue (usually at a lower rate),Interest charges stop when the proposal is filed and you usually pay only a portion of the total debt
Fees are at the discretion of the credit counselling firm and vary widely,Fees are regulated by the Office of the Superintendent of Bankruptcy
At this time, credit counselling is largely unregulated by the government. This means that no special licensing or training is required to become a counsellor and pretty much anyone can call him/herself one. That can have serious consequences for the unwary consumer. Always remember that your financial health is critical to you, your family, and your future, so if you’re seeking the help of a credit counsellor, be sure you know who you’re taking advice from (at Doyle Salewski, we require all our credit counsellors to be fully accredited by the Canadian Association of Insolvency and Restructuring Professionals).
For more information about our own credit counselling services—or to find out if that option is the right one for you—call us today to schedule a free, no obligation consultation: in Ottawa call 613-237-5555; out of town, call toll-free 1-800-517-9926.
Credit Rebuilding Tips
- 5 Steps to Rebuilding Your Credit Rating
- What a Credit Counselling Firm Can Do for You—and What it Can’t Do.
- Beware the Quick Credit Fix
- Home Ownership During a Bankruptcy or Consumer Proposal