Credit Counselling

Can a credit counselor help? Credit counselors have the ability to help you with budgeting issues and can set up a Debt Management Plan (DMP). A DMP is a voluntary arrangement between you and your creditors. A DMP is not a formal legal process and is not governed by the Bankruptcy and Insolvency Act. As a result it may not allow you to deal with all of your creditors and there is no legislation forcing your creditors to participate in the process.

The DMP program allows a credit counselor to help you reduce or eliminate your interest charges and consolidate your debts into one monthly payment. This can be a good a solution provided that you have a consistent source of income which would allows you to make regular monthly payments and that you have a manageable amount of debt.

If you wish to speak with a credit counselor and review this option further, we recommend using one of the following not for profit credit counseling agencies. These firms are United Way sponsored agencies are able to counsel you with your best interest at heart.

• In Stratford & Owen Sound:
  • Family Services Perth-Huron http://www.debtontario.com
• In Kitchener-Waterloo & Cambridge:
  • Catholic Family Counselling Centre http://www.cfcchelps.ca
• In Guelph:
  • Family Counselling and Support Services Guelph Wellington http://www.familyserviceguelph.on.ca

What are the main advantages and disadvantages of a DMP?

The main advantages of a DMP are that you can avoid bankruptcy, consolidate your debts into one monthly payment and reduce or eliminate interest charges. You do not have to be insolvent to file a DMP.

The major disadvantages of a DMP are that you are not able to compromise the amount of debt owed and there is no legislation forcing creditors to participate in the process. If some of your creditors choose not to participate in this program, or decide that they are not willing to reduce or eliminate their interest charges the DMP has no way to force these creditors to cooperate.

How are my payments calculated in a DMP?

Your payments in a DMP are calculated by taking the total amount you owe, adding a 10% administration charge, and dividing that amount by 48 months. For example if you owed $10,000 your monthly payments in a DMP would be approximately $229.00 for 48 months.

Calculation: (Total debts + 10% Admin fee)/48 Months.

For more information on DMP's and to discuss your situation in more detail please contact one of the credit counseling agencies listed above.

If I have the ability to make some payments to my creditors but can't afford the amount required by a DMP what other options do I have?

If you have the ability to make some payments to your creditors but cannot afford the amount required by a DMP you should consider making a consumer proposal. Consumer proposals are a formal action under the Bankruptcy and Insolvency Act which like a DMP allow you to avoid bankruptcy, but also give you the ability to compromise the total amount of debt owed.

How does a DMP affect my credit?

A DMP results in a R7 credit rating which will stay on your credit bureau report for 3 years after you have completed your payments. The DMP has the same affect on your credit rating as filing a formal proposal to creditors under the Bankruptcy and Insolvency Act.