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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. 

 

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.

 

Agencies that offer credit counseling are comprised of ones that are for profit as well as ones that are non-profit. Both types of agencies will charge a fee for their services. You can expect them to formulate a Debt Management Plan that meets with your approval. They will then present the plan to your creditors. This will not include creditors that have secured their loan. These usually include home mortgages and loans on an automobile.

 

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.

 

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.

 

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.

 

When you choose a Consumer Proposal, your credit counseling service will negotiate with your creditors on your behalf. Their goal will be to reduce the amount owed by you to your creditors. If your wages have been garnished then by law this must stop. This is one of the main differences between the two plans. With a Debt Management Plan your wages can still continue to be garnished, and it will be at the discretion of your creditors whether to remove it or leave it in place.

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.