Credit counseling (which is called credit counseling in the United States, and credit counselling with two l’s in Canada and England) typically involves using the services of a credit counsellor to negotiate a settlement with your creditors. It’s called a debt management plan, and here’s how it works:
Your credit counselor contacts each of your creditors, and works out a plan where you repay your debts, in full, over a three to five year period. Often they can negotiate a plan where your repayments are made with little or no interest, so you can repay your debts faster than if you repaid them on your own.
How do you know if credit counselling is the correct solution for you? Start by looking at your household budget to see what you can afford to pay each month. Then add up all of your credit cards, bank loans, and other debts, and divide that number by 48 (with 48 being the typical number of months in a debt management plan, although they can last for up to 60 months). If your total debts are $48,000, you would be paying approximately $1,000 per month in a debt management plan.
If you can afford that, credit counseling may be the correct option for you. If not, you may need to consider a consumer proposal in Canada.