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  Calgary bankruptcy  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.

The idea of declaring personal bankruptcy is more than some people can bear, so they turn to credit counseling agencies, unaware there is yet another potential solution that gets little publicity – the Consumer Proposal.  Let’s walk through a brief overview of what’s involved in both a credit counseling service and a Consumer Proposal.

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.

A Debt Management Plan will not decrease the total amount of debt that is owed. It simply makes the payment schedule more manageable by restructuring it. For example, if your total unsecured debt is $30,000, then you will be remitting the whole amount, through a manageable repayment plan, as well as any fees owed to the credit counseling service.

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.

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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Originally posted 2010-04-29 19:42:55. Republished by Blog Post Promoter

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