Debt Management Plan: Debt Negotiation & Settlement with Creditors

If you cannot solve your money problems by budgeting or by debt consolidation, then debt negotiation and settlement with your creditors trough a Debt Management Plan may be right for you.

The idea behind a Debt Management Plan is this:

You can afford to make a monthly payment. You just need some help negotiating with your creditors, and a little breathing space to get back on top of things.

Example: If you owe money on four different credit cards, your credit counsellor will contact each of the four credit card companies to get them to agree to your plan. Once the agreement on debt negotiation and settlement is achieved, your credit counsellor collects your payment from you each month, and then disburses the money to your creditors.

Advantages of a Debt Management Plan

• Here's the big advantage to a Debt Management Plan:
  In most cases your creditors will agree to waive most or all of the interest, so all of your payments go towards the principal, which means you repay your debts faster!
• Maximum repayment period is 5 years, which is faster than repaying the debts on your own.
• You have only one payment each month to deal with all of your creditors. Your budgeting is much simpler, and you can stop worrying about who gets paid from this week's paycheque!
• You don't need to worry about talking directly to your creditors, because your credit counsellor acts as the "middle man", negotiating on your behalf.
• Debt Management Plans have a high success rate with credit card debts and bank loans. They also work with payday loans and finance company loans. However, because of the differing policies of these types of lenders, a Debt Management Plan may be less successful.

Consumer Credit Counselling benefits

For a Debt Management Plan, you will need a credit counsellor, who can also provide other benefits.

Your credit counsellor works for a not-for-profit credit counselling agency, which means that he or she really works for you.

In addition to negotiating a payment plan with all of your creditors, consumer credit counselling can be used to help you with budgeting and any other money management skills you need.

If you just need some free professional help in getting financial control of your life, look into credit counselling!

What if debt negotiation & settlement is not an option in my case?

A Debt Management Plan is a great way for many Canadians to avoid personal bankruptcy and get relief from their debts. However, it is not for everyone.

To stop a garnishment order or other legal proceeding, you may need to file a consumer proposal to your creditors through a licensed trustee in bankruptcy.

If you don't believe consumer credit counselling and debt negotiation and settlement through a Debt Management Plan is right for you, the next option to consider is making a formal consumer proposal to your creditors.