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Debt Management Plans Canada
What is debt management plan?
A debt management plan is a service provided by a credit counselling agency, giving you a simplified payment plan for your debts and some relief from interest costs. Most Credit counsellors are not-for-profit agencies created to help individuals experiencing financial distress.
What can a credit counselling agency do for me?
First, a credit counsellor meets with you to assess your situation, help you make a budget, and give you some advice about dealing with your money problems. This can be a great help if money management skills will be enough to get your finances in order.
Then, if your debts are so large that you can’t handle them on your own through budgeting and expense reduction, the credit counsellor will work out a debt management plan with your unsecured creditors. You will then give the agency a regular payment, which they will distribute to your creditors.
How does a debt management plan deal with my debts?
In a debt management plan:
- You must usually repay your entire debt, although creditors may forgive some debts.
- Your creditors agree to take payments over a period usually no longer than four years, occasionally up to five years.
- Your creditors, in many cases, agree to reducing or eliminating the interest on your debt.
- Some of your creditors may not be included.
- Agreement by your creditors is voluntary and not legally binding.
- A wage garnishment is not stopped, unless the creditor agrees to stop it.
Is a debt management plan right for me?
A debt management plan is best suited for you if:
- You can’t get a debt consolidation loan, because your credit rating is poor.
- You owe no more than $5,000.
- You have five or fewer unsecured creditors.
- You can afford to pay the full amount of your debts, but need an extended time to do so without accumulating more interest.
What should I do if I want to try a debt management plan?
To contact a credit counsellor, do one of the following:
- Look in the Yellow Pages under Credit Counselling.
- Check moneyproblems.ca for a credit counsellor in your area.
- Contact us.
What should I do if I can’t afford to pay the full amount of my debts?
If you can repay only a portion of your debt, a consumer proposal may be a better option.
If you cannot reasonably be expected to make any significant payments toward you debt, a bankruptcy may be necessary.
We recommend that you contact us today, to review your situation and help you decide which option is best for you. If money management skills and a debt management plan look like a feasible solution, we will put you in touch with a credit counsellor in your area.