Debt Management

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Debt Relief Options- Differences Between Bankruptcy and Debt Repayment

|Published on: Apr 25, 2017|Categories: Debt Management, Credit Counselling|

Debt Relief Options- Differences Between Bankruptcy and Debt Repayment

Overwhelmed by your debts? You are not alone! Consumer debt is at an all-time high in Canada. Whether you are in debt because of a job loss, illness, or overspending, debt can be burdensome. In your efforts to get back on track, it is important for you to understand the benefits of different debt relief options so you can make an informed decision.

Be aware of debt relief options that promise to be quick fixes. While it sounds lovely to have all your debts eliminated fast, you may live with long-term consequences. Be sure to check on the credentials of the business or agency including license, accreditation, certification of counsellors and other relevant qualification.

One of the options to release you from the majority, if not all your debt, is bankruptcy. This process takes place through a Licensed Insolvency Trustee. A consumer proposal might be another option offered through a trustee. This is a proposal made between you and your creditors that usually has you repaying a portion of the debt you owe rather than the full amount.

You might consider repaying your debts in full with the assistance of a debt repayment program. This program can be set up through a not-for-profit credit counselling agency. A debt repayment program is somewhat like debt consolidation. Your credit counsellor will work with you and your creditors to arrange your debts into one affordable monthly payment divided amongst your creditors. You will determine what you can afford for a payment each month, while still maintaining your living expenses.

Although all programs offer debt relief options, there are significant differences between the two industries:

Not-for-profit credit counselling aims to provide objective assistance, presenting consumers with all their available options for debt relief.
For-profit trustees sell two debt relief options, consumer proposals and bankruptcy.

Not-for-profit credit counselling agencies are governed by contributing community volunteers who act jointly to impact their community.
For-profit trustees may register as sole-proprietor companies.

Not-for-profit credit counselling agencies are regulated in the amount of spending on advertising.
For-profit trustees have no regulations around amount of advertising carried out.

Not-for-profit credit counselling agencies are licensed in their province, accredited by the national association and counsellors must be certified as Accredited Financial Counsellors.
The federal government monitors licensed Insolvency Trustees.

Credit counselling clients have direct contact with their counsellor over a the course of their debt management program (1-5 years, average 39 months).
Bankruptcy and consumer proposals generally see clients discharged within 2 – 5 years.

Accessing credit counselling services and entering a debt management program is completely confidential.
Declaring bankruptcy or filing for a consumer proposal is public knowledge and the person’s name is added to a database, which can be searched by anyone willing to pay $8.

As you seek out assistance, it is important that you have the proper information to make educated decisions. Our credit counsellors can help you explore all your options and lay out the pros and cons for each of them. The number one priority for all member agencies is being fully transparent and putting your best interests first. Find a credit counsellor in your area and get started today!

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