Online Calculator | Comparison Of Credit Counseling And Credit Counseling

Comparison Of Credit Counseling And 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.

When most of us think of debt solutions, our minds turn to bankruptcy or credit counseling. The airwaves and other advertising venues are crammed with pitches for bankruptcy assistance as well as Calgary credit counseling services.

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.

Credit counseling assistance is offered through both for-profit companies and not-for-profit agencies. Both charge fees for what they do. The end result of working with a credit counselor is the preparation of a Debt Management Plan, which the credit counselors present to your creditors. These plans only apply to your unsecured debt, not to secured debt like car loans and home mortgages.

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.

It’s important to understand that under a Debt Management Plan you will be repaying the entire amount owed to creditors of unsecured debt. The benefit to you is seen in payments that are now more manageable. Added to the total debt owed will be any fees that are owed to the credit counseling service.

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.

Since a Consumer Proposal is a binding legal agreement the government requires consumers to secure the services of a licensed professional bankruptcy trustee to file one. Unfortunately, some consumers who are aware of the existence of bankruptcy trustees avoid talking to them, thinking they only handle bankruptcies.

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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