The good news is that you have options. Debt consolidation may sound like an easy way out of your debt problems, but it can come with a price for some people.

Debt consolidation is sometimes needed if you’ve been turned down for credit or need to rebuild your credit score after bankruptcy or other financial struggles. You should also consider debt consolidation if your current loan rates are too high and you could potentially lower them by consolidating multiple debts into one monthly payment. There are pros and cons to this approach so make sure to do the math first before starting the process!

Let’s explore these areas further.

You have multiple debts and want a single monthly payment

Juggling multiple bills and payments every month can be very stressful and overwhelming. It can be hard to keep track of what you owe and when your payments are due. Having a single monthly payment would make it much easier to manage your debts and would reduce the amount of stress you feel every month.

In today’s society, it feels as if everyone has an endless list of things they must pay for each month, which is only made worse by the fact that money doesn’t seem to grow on trees. Bills can pile up quickly, and before you know it, your bills are stacking up like a house of cards. Having multiple debts makes for some very long workdays as you attempt to pay off all of your bills on time each month. Unfortunately, there isn’t always enough money left over at the end of the month to pay down all of your debts. If you’re struggling with managing multiple bills and payments, debt consolidation may be an option for you.

You’ve been turned down for credit and need a way to rebuild your credit score

Debt consolidation may be a great option that you can explore if you have been turned down for credit and need a way to rebuild your credit score. Debt consolidation can help you save on interest rates, because it puts all your debt in one place. As a result, you’ll only have one bill to make each month. You’ll also save money because you won’t have to pay high interest rates to several different lenders.

Typically, if you have experienced being turned down for credit your debt consolidation options do become limited. However, that doesn’t mean bankruptcy is your only option. A formal consumer proposal may be the perfect option if you want to reduce your debt. Formal consumer proposals are designed to help those who have typically been turned down for credit due to their financial struggles. The proposal helps them reduce their debt and give them a chance to start rebuilding their credit score, again.

Your current loan rates are too high and you could lower them by consolidating

Debt consolidation is a good choice for those that have high interest rates on loans. Different debt consolidation options can reduce or completely eliminate interest. Debt consolidation includes the merging or combining of all your debts into one payment arrangement. This could be in the form of a consolidation loan or through a formal option like a consumer proposal or bankruptcy. Debt consolidation typically leads to substantial savings on interest over time as a common trend of consolidating is a reduction of interest. This can save you hundreds of dollars each year, which can be used to pay off other debts that might still have higher interest rates, or saved for unforeseen future expenses.

If you’re not sure which debt consolidation program would work best for you don’t hesitate to reach out to us. We’d love to help you on your debt consolidation journey

This article was written by David Moffatt. A Debt Relief Expert. He has helped assist in creating plans that have helped save Nova Scotia residents over $30 million dollars of consumer and tax debt since 2015. We believe that no consumer should have to struggle with the stress of overwhelming debt. Our debt restructuring strategies can help you cut your debt by up to 80%.

If you are struggling with debt please reach out. It hurts to continue to suffer financially. Halifax Debt Freedom services Halifax, Dartmouth, Bedford, Sackville the entirety of HRM, and all of Nova Scotia.

Here are some simple steps that you can take today to get your debt under control:

1. Calculate Your Total Debt

When debt starts piling up, sometimes the knee jerk reaction is to bury your head in the sand and to stop keeping track of how much you owe. This, of course, only makes the problem worse, so the first step is to add up all of your debt. It may be overwhelming to begin with, but it’s an important first step to take. 

Make a list of everyone you owe money to and how much. This might include household bills, mortgage or rent, credit card repayments, money owed to family and friends, and any other personal or payday loans you have. It’s a good idea to jot down beside each payment how often you need to pay it, when the next payment is due, and whether you have fallen behind on any. 

Having everything you owe accounted for will make it much easier to get help with debt, as you will have a clear picture of what your total outgoings are, compared to your income. Start opening your bills straight away and filing them away in a safe place so nothing gets misplaced. Avoiding your debts only adds to the stress.

2. Categorize Your Debts By Priority

Now that you have a clear idea of how much you owe, the next step is to prioritize your debts. 

When it comes to understanding your debt options, it’s key that you know which payments are the highest priority. Paying off debts in the correct order will help you to avoid getting into further debt. There could be larger consequences for missing a payment to a debt collection agency, for example, than a small payday loan. 

The same goes for how many payments you’ve missed. If you’ve missed several payments on your rent, then you could risk eviction, making this a high-priority issue. If you’ve only missed one payment, on the other hand, then this might not be as urgent as some other debts on your list. 

Work through your debts and categorise them into high priority, mid priority, and low priority debts. High priority debts should include any urgent debts with serious consequences, like getting your electricity or gas turned off, having your home or other items repossessed, or receiving a court summons or eviction notice. If you’re experiencing any of these high priority debt issues, it’s time for you to ​​get debt help.

3. Create A Realistic Budget

If you’ve completed steps one and two, you’re already on your way to taking back control of your finances. Now that you have a clear picture of exactly what you owe and which debts need to be tackled immediately, the next step is to set yourself a budget. 

Having a realistic budget is the best way to keep on top of your finances. Learning to understand what you take in, what you owe, and what is left to live on is crucial. If budgeting is new to you, seek financial debt help from a friend or family member or from an organization that offers debt advice. 

When creating your budget, it’s important to keep track of every outgoing you have. It’s often easy to take out cash at the start of the month and lose track of how much you’re actually spending on miscellaneous purchases. 

Divide your budget into categories to make it easier to see where you can cut down on spending and make savings. The categories should reflect your lifestyle, but common examples include household bills, debt repayments, transport costs, loan repayments, mortgage or rent, leisure, and miscellaneous living costs.

Create a budget for each month –taking into account any additional one-off outgoings you might have that month– and check it regularly to make sure you are sticking to it. 

Look for easy ways to cut down spending by swapping that Starbucks coffee for a homemade brew, switching to supermarket own-brand groceries, and using public transport when possible. You can even contact your electricity and gas providers to see if they can offer you a better deal or switch providers to make the most of cheaper deals.

Learning how to budget will help you to cut costs and reduce your debts.

Source: https://pixabay.com/illustrations/piggy-bank-money-finance-banking-2889042/ 

4. Boost Your Income

Once you’ve calculated your outgoings and where you can make some savings, consider ways to boost your income to pay off a larger chunk of debt. 

One of the best ways to help pay debt is to find a way to increase your earnings while reducing your spending. Finding a part-time job could provide some extra cash to pay off your debts, providing that your earnings are small and you don’t end up paying too much tax on your second income. 

Every little helps, so get creative: sell off unwanted clothes, toys, and gadgets and put the money towards clearing debts. 

Another way to increase your earnings is to find out if there are any benefits, grants, tax breaks, or money-saving schemes that you are eligible to apply for. Speak to your local non-profit organization to find out more about what financial aid you could be entitled to. 

5. Contact Your Creditors

Freeing yourself from debt often involves asking for help. This can be difficult, but keep your end goal in mind: getting back in control of your finances. 

Take a look through your priority list and consider contacting creditors from the priority and low priority categories to ask for help for debt. While creditors are not often known for their leniency, it’s always worth speaking to them directly and seeing if they can offer any debt relief. 

The amount of support a creditor will offer depends on the circumstances, such as:

• The amount of money you owe
• If you have missed repayments, and how many
• If there are specific circumstances that explain why you are requesting extra support
• The creditor’s evaluation of your ability to make your repayments
• The type of payment or debt you are requesting extra support for (eg. if it’s a credit agreement or a bill)

In some circumstances with low priority debts, your creditor may be able to offer help in debt if you have proven yourself as a reliable lender (who has gotten into arrears due to unfortunate circumstances), or if you have shown that you are taking steps to get out of debt, such as selling off assets.  

While it’s not a guarantee, contacting your creditor is worth a shot to regain financial freedom. In some extreme circumstances, where the borrower can prove that their financial situation isn’t likely to improve (for example, due to health reasons), debt can even be wiped. This is why it’s key to speak with creditors to know where you stand. 

6. Get Professional Advice

Finding an organization that can offer you professional advice will give you peace of mind and remind you that you’re not alone. 

There are a number of organizations that offer debt help on online platforms and in-person. Speaking to a stranger, without fear of judgment, can help you to gain some perspective on the situation. 

Professionals who offer debt help are especially important if you’re in serious debt and require a debt repayment plan or need to file for bankruptcy. Experienced professionals will be able to walk you through your options and make the best decision for your personal circumstances. 

There are legal debt relief programs, providing interest reduction, and debt repayment plans to help those in debt get back on their feet. Professional debt advisors can let you know if you qualify for any of these programs, which can offer a quicker path out of debt. 

Your debt advisor deals with people in similar situations to yours every day, and can offer you advice without judgment, and always 100% confidential. 

There are plenty of options when it comes to sorting out your debts, and your debt advisor will suggest the best debt options for you and make sure that you’re receiving all the benefits and other aids that you’re entitled to. Most importantly, when you ask for help with debt from a professional, you’ll know you are no longer alone.

Key Takeaways 

Dealing with debt can be stressful, but you don’t have to go through it alone. You can begin the process of freeing yourself from debt today by taking the small, manageable steps laid out in this guide.

A debt relief expert can walk you through the process and help you to understand the debt options that are available to you. They can draw up the best solution for your personal circumstances, offer advice on budgeting, and simply provide a listening ear when things get overwhelming. Debt doesn’t have to control your life. Take the first step today – tomorrow is one step closer to a debt-free future. 

This article was written by David Moffatt. A Debt Relief Expert. He has helped assist in creating plans that have helped save Nova Scotia residents over $30 million dollars of consumer and tax debt since 2015. We believe that no consumer should have to struggle with the stress of overwhelming debt. Our debt restructuring strategies can help you cut your debt by up to 80%.

If you are struggling with debt please reach out. It hurts to continue to suffer financially. Halifax Debt Freedom services Halifax, Dartmouth, Bedford, Sackville the entirety of HRM, and all of Nova Scotia.

If you are one of those people, then you have access to multiple debt relief options. Of course, bankruptcy is one of them. However, it has long-term ramifications for your credit score. Considering the fact that credit scores are the first thing that creditors look at before issuing you a loan, bankruptcy is not an option many people wish to pursue.

Thankfully, there are multiple ways for you to settle your debts. Here, we explore some of those options and guide you on how you can get out of debt without going bankrupt.

What is Debt Relief

Debt relief is when creditors allow the debtor to repay their loans in a manner that could prevent bankruptcy. Creditors opt for this option because they have a better chance of recovering some of the unsecured debt that they loaned out. In the case of bankruptcy, they may have to settle for a small payment or a lump sum which is quite less than the value of the loan.

Usually, debt relief is provided in three major ways:

1. Creditors allow the debtor to come up with a debt repayment plan and make the payments over a longer period.
2. The interest rate on the loan is reduced. This is usually done through debt consolidation.
3. The amount of money to be paid is reduced, usually through a consumer proposal. 

However, these options are not free money and can have adverse effects on your credit report.

All three of the aforementioned ways are some form of debt relief, where you use a debt management plan to eventually pay off your loans. Before we look at debt settlement and other ways to seek debt relief, let’s take a look at when you should start considering alternative ways to relieve your debt.

Using a Credit Counsellor

If you’re in debt, help from a credit counsellor is the first step most Canadians look for when trying to improve their situation. If you’ve done any sort of research, you are probably in the same boat.

Accessing a credit counsellor in Canada is not that difficult. While you can hire a credit counselling agency, they may charge high fees for their services. Most are non-profit credit counselling agencies that can help you set up a debt management program. These credit counsellors might offer free advice but usually, charge fees for their service.

Credit Counselling can be one of the most expensive debt help options that exist, so it is important to review all options available.

Knowing When to Seek Debt Relief

Remember that while credit counselling can help you come up with debt solutions, your first question should be whether it is time to seek debt relief yet. It may be possible for you to pay back your creditors through better money management instead (i.e. selling off assets, reducing expenses, or coming up with a better budget). However, if it is simply impossible for you to make your monthly payments, then debt relief is your only option.

Remember that when you first meet your counsellor, you must disclose not only the volume of your debt but also its nature. Certain loans (e.g. student loans) are extremely difficult, if not impossible, to write off or reduce depending on the situation, whereas others such as credit card debt can be settled without much hassle.

A Note on Credit Card Debt

While we are on the subject of credit cards, keep in mind that wiping off credit card debt should be your first priority. Dealing with debt of any kind is important, but credit card debt takes the cake when it comes to securing your financial future. Credit card companies can charge exorbitant interest rates on unpaid credit card bills and the interest rate increases as you fail to make payments.

If you plan to make use of debt settlement companies, make sure that they reduce the monthly payment on your credit card before anything else. The only caveat to this is if you have other unsecured debts at an even higher interest rate than your credit card.

Ways to Seek Credit Debt Relief

Choosing the right debt relief option for yourself can be tricky. As such, it is usually a good idea to opt for a debt relief company. That company can appoint their own credit counsellor or debt advisor that could analyze your total unsecured debt, calculate the total amount you owe, your available resources, and how you make money. Then, they can suggest the right financial plan that allows you to pay back your loans.

Just remember that none of these companies will work for free. Yes, you can find a counsellor to provide you with basic guidance on paying off your debts or reducing expenses, but any company that can reduce your debt will require you to pay fees. Make sure that you select an agency that is capable but still within your budget.

So, before you believe bankruptcy is your only option and you look to you sign the bankruptcy forms, Here are the major debt relief options available to you:

Debt Consolidation

Debt consolidation is a process that allows you to pay off all your loans and replace them with a single loan at a lower rate. Debt consolidation is great for your credit score, as you will still be paying off the entire debt.

However, you will no longer have to worry about collection calls and huge monthly payments. Instead, you have one monthly payment with a payment plan that is designed specifically for you. You choose a company that pays off all your creditors and then writes you a new loan. Just make sure that you get an interest rate that you can easily manage to pay. If it seems like you will still have to pay too much money on the new loan, then you may have to resort to a consumer proposal instead of debt consolidation.

Formal Debt Settlement

In Canada, debt settlement takes place through a consumer proposal. If there is simply no way for you to pay your debt and you are looking at a bankruptcy with the liquidation of your assets (known as Chapter 7 in the US), then a consumer proposal is the best way to alleviate some of your debts. A proposal is filed through a licensed insolvency trustee. The trustee acts as a referee between you and your creditors and are paid based on how much you repay to your creditors.

During a consumer proposal, you will negotiate with your creditors and reduce your debts. Creditors will usually play along as they will stand to get less of their money back in the event of a bankruptcy.

During a consumer proposal, it is possible for your debts to decrease, and the interest rate to be eliminated to be in line with your budget.

Informal Debt Settlement

Informal debt settlement is similar to a consumer proposal in many regards. However, you yourself are responsible for directly contacting and negotiating your debts with your creditors. You must be honest about your financial situation and let them know that you cannot pay back the money owed.

However, this is a process that requires significant efforts and is quite difficult for the average consumer and thus should only be undertaken after speaking with a professional.

Bankruptcy

Typically, bankruptcy acts as a last resort for debt settlement. This may seem like an enticing option when you have a lot of debt. However, it can lead to less financial freedom for years afterward. Your credit score will take a massive hit, and you may have to sell off a lot of assets to make payments to creditors.

That said, bankruptcy is the easiest way to be debt-free. If you think the ramifications are worth it, then declaring bankruptcy is the most hassle-free method of achieving financial security once again. We recommend consulting a professional before making this decision.

Things to Remember During Debt Settlement

Debt relief programs are extensive and complicated. There are literally hundreds of mistakes that consumers make when paying off their debts, and this leads to a lot of financial trouble down the road. Here are a few tips to remember when consulting and making decisions regarding your debt.

• Borrowing against your house is almost always a bad idea. If you are having trouble making your payments right now, an additional mortgage will only compound your problems.
• Make sure that the length of your program is in tune with your financial goals. You do not want to put off your retirement because you are settling your debts.
• It is best to be prudent with your financial decisions in general. This can help you avoid debt in the long run. Consumer debt, which is debt used to purchase goods for household or individual consumption, should especially be avoided.

Conclusion

Being unable to pay your debt is by far the most devastating feeling when it comes to your personal finances. Many people in Canada believe that bankruptcy is their only option. While defaulting on your obligations does lead to a lot of debt being forgiven, it is not the only way to ease the burden on your bank account. No matter how much debt you have, you should seek professional advice if you are struggling.

This guide has outlined a few ways through which you can acquire debt relief. None of them are necessarily better than the other. The one most suited to you will depend on your financial goals and ability to make payments. As such, it is best to choose a debt relief agency that can analyze the state of your finances and recommend a viable debt relief program.

This article was written by David Moffatt, a Debt Relief Expert. He has helped assist in creating plans that have helped save Nova Scotia residents over $30 million dollars of consumer and tax debt since 2015. We believe that no consumer should have to struggle with the stress of overwhelming debt. Our debt restructuring strategies can help you cut your debt by up to 80%.

If you are struggling with debt please reach out. It hurts to continue to suffer financially. Halifax Debt Freedom services Halifax, Dartmouth, Bedford, Sackville the entirety of HRM, and all of Nova Scotia.

Why is debt management important?

Managing your debt is crucial to a healthy financial future. Unfortunately, life often gets in the way of that and pushes people over the edge financially. Worry not. There is always a solution to every debt situation out there.

While options like debt management plans and a debt settlement program are widely popular, they are not necessarily the most effective debt solution process that exists. There are many options outside of a debt management plan that can help you become debt-free in a much faster period than these programs would.

Is debt management a good option for unsecured debt?

Of course, managing your debt is always a good option when dealing with any debt, unsecured or not. However, if you intend to specifically learn whether or not a debt management plan (A specific form of debt solution) is the most effective for you or not, then here is your answer.

When compared to other options, a debt management plan is often much more expensive. Because of this, we estimate that the failure rate is incredibly high.

What is an example of debt management?

Examples of debt management can include the implementation of many different programs, including:

• A debt management plan – offered by a credit counseling agency,
• A consumer proposal, or bankruptcy,
• An informal proposal,
• A proper budgeting program, and
• A debt consolidation loan.

Depending on the circumstances, it can be as simple as developing a sound and proper budget or going as severe as a bankruptcy. Put simply, any plan of action put in place to reduce and/or get a handle on existing debt can be a sound debt management program.

What does a debt manager do?

A debt manager will typically help assist in implementing a debt management program. This can include any of the above items. In addition, they will typically assist you in understanding all traditional methods like budgeting and debt consolidation loans to options that can help reduce interest and/or principal amounts owing like a debt management plan, a consumer proposal, or bankruptcy.

A debt management program should not be confused with a debt management plan, a specific form of restructuring. Debt management plans are offered through a credit counselling agency where you work with a credit counsellor. While these debt management plans offer single monthly payments, they can be one of the most expensive debt relief options.

What does a debt management program do?

A debt management program is designed to help layout an easy-to-follow plan to help get you out of debt. Any good plan will focus on financial literacy and education, an explanation of all debt options available, and a focus on credit rehabilitation, including education on how to read your credit report.

A debt management program usually aims to consolidate your monthly payments into an affordable, single, monthly payment.

Are debt management programs worth it?

Implementing a debt management program can be the best financial move you can make, depending on your situation. If you have been struggling to become debt-free and are frustrated seeing your credit score be constantly low and your credit report riddled with outstanding and high-balance unsecured debts, you should certainly look into one.

How much does debt management cost?

The cost of debt management really depends on your individual financial situation, the complexity of your situation, the types of debt you have, and the debt relief option you decide to pursue. Some options require you to pay them a monthly payment for the duration of your program, such as a credit counselling debt management plan.

Other options such as consumer proposals or bankruptcy, administered by a licensed insolvency trustee, have a tariff set by the federal government.

In all instances, it is usually recommended to obtain your own representation when looking at any debt repayment program. Most debt solutions providers, including a licensed insolvency trustee and credit counsellor, work indirectly or directly for creditors.

Without proper representation, you can end up with a monthly payment that far exceeds your monthly budget and can hinder your journey to a debt-free life. Therefore, we recommend you speak with an unbiased debt consolidation expert.

Despite popular belief, there are no free debt relief programs or any ‘free’ government program. This includes the notion that there are free credit counselling agencies. Unfortunately, this has been pushed into the marketplace by the misconception that non-profit means that a credit counselling service bears no cost to the consumer.

Can I do a debt management plan myself?

If you are looking to pursue a debt management plan (DMP) offered through a credit counsellor, then the answer is no.

However, debt management can include many of the options we have discussed in this article. Furthermore, many of them can be thoroughly designed and implemented by you without the help of a professional.

However, we always recommend seeking professional advice before making any decisions.

What is a typical debt management plan?

A typical debt management plan involves consolidating debt that is troubling you into a single monthly payment. You will first speak with a credit counsellor who will outline a payment plan based on your debt.

This typically involves a payment plan between 36-60 months and usually only involves a reduction in interest, not principle. Debt management plans impact your credit score negatively. They also cannot include student loans.

For most consumers, there are options, like the consumer proposal, that are usually far cheaper, can have student loans included (under certain conditions), and allow your credit score to improve at a much faster rate after filing.

How long do debt management plans last?

Debt management plans usually last for 36-60 months.

What is the purpose of a debt management plan?

A credit counselling plan is designed to eliminate interest charges but not the principal amount owing.

What is the best plan to get out of debt?

There are many different options to getting out of debt. The best plan is designed specifically around your individual financial situation. There are many options like credit counselling, consumer proposals, debt settlement, and bankruptcy, to name a few.

Knowing which one works best will depend on your mix of unsecured and secured debts, what creditors you currently owe money to, your goals to re-establish credit, and your household income and expenses, to name a few of the criteria.

What are the negatives of a debt management plan?

The primary negative of a debt management plan (DMP) is that the overall cost is usually much higher than other options, such as a consumer proposal.

The second negative associated with a DMP is the long impact on your credit score. Your score will typically not be ‘fixable’ until you have fully paid off your DMP.

How long can you be on a debt management plan?

These plans usually last for 36-60 months in duration. However, you can pay them off early if you can save money to get out of debt sooner.

What is a debt settlement plan?

Debt settlement is a specific form of debt restructuring. We recommend reading our other article on debt settlement.

What are the top-rated debt management companies?

We believe we are the best debt management company that exists in the marketplace. This is because we exclusively represent the individual that is struggling in debt.

What are debt management companies?

Debt Solution Companies employ debt experts to help consumers find the best way out of debt.

Are debt management companies a good idea?

They can be depending on the severity of your situation. Thankfully most offer a free debt assessment to determine the best debt relief solution for your situation.

Can you be refused a debt management plan?

Not every credit counselling organization is the same, and not every creditor works with every accredited credit counselling agency. A creditor does not have to accept your plan.

Can you lose your house on a debt management plan?

No, you cannot lose your house when pursuing a DMP.

How can debt be reduced in Nova Scotia?

Many different programs can help reduce and eliminate debt in Nova Scotia. Options include:

1. A proper budgeting plan,
2. Strategic selling of assets to pay off debt,
3. Debt Consolidation Loans,
4. Credit Counselling,
5. Consumer proposal, and
6. Personal Bankruptcy.

The last 4 options will usually allow you to obtain one monthly payment to deal with all of the debts and include a reduction or elimination of the interest rates associated with the unsecured loans.

Is a DMP credit counseling?

Yes, DMP stands for Debt Management Plan. These plans are typically offered through a credit counselor who a credit counselling agency employs.

This article was written by David Moffatt, a Debt Relief Expert. He has helped assist in creating plans that have helped save Nova Scotia residents over $30 million dollars of consumer and tax debt since 2015. We believe that no consumer should have to struggle with the stress of overwhelming debt. Our debt restructuring strategies can help you cut your debt by up to 80%.

If you are struggling with debt please reach out. It hurts to continue to suffer financially. Halifax Debt Freedom services Halifax, Dartmouth, Bedford, Sackville the entirety of HRM, and all of Nova Scotia.

Whether it’s your credit cards, student loans, uninformed investments, or simply poor money management, there are many reasons you might be in debt.

At times like this, it can be very tempting to avail the services of debt managers.

Well, a debt management program can help you. But that help comes at a cost. And is that cost worth bearing to get out of debt?

Before deciding, consider what benefits and drawbacks debt management programs have that you might still be unaware of. Find out below.

What Is a Debt Management Plan?

If you choose to enter a debt management plan, you will be working with a credit counsellor who a credit counselling agency employs.

The agency is typically licensed to make payments on your behalf. To this end, the agency will assign you a credit counsellor. Credit counsellors are tasked with working with you closely to help you figure out a payment plan to settle balances with all your creditors over a specified, limited time period.

The plan will include a payment plan based usually on how much debt you have and typically one that allows you to make one monthly payment towards all of your debts.

Your credit counsellor will draw up a payment schedule for you, which will specify a time period, usually around 5 years, in the course of which your creditors will be paid off using monthly payments.

Generally, you’ll have to deposit a certain amount of money to the debt managing company, which they will then use to make monthly payments and help you gradually eliminate your debt(s).

For part of your debt management plan (DMP), your creditors might also agree to a lowered interest rate at this stage, and some might even eliminate interest entirely.

Some might waive fees here and there. However, this is not always a given and depends greatly on the reputation of the credit counselling agency you choose, along with your record and financial situation.

Another one of the debt solutions some people look to is traditional debt consolidation. In that process, however, you’ll be required to take out a loan to pay out the existing debts that you already have.

Considering this, a DMP might sound like a lucrative debt solution. However, credit counselling should not be your first resort to get out of debt.

While these plans might help you get debt relief, they’re not for everyone. Here’s what you need to consider about debt management plans before considering a proposal.

11 Facts About Debt Management Programs

Before you decide whether to take the help of a credit counselling agency, consider the following factors.

1. A Debt Management Plan is Not a Loan

Unlike traditional debt consolidation, which involves taking out a new loan to pay off existing ones, you won’t be getting into further debt with a debt management plan.

Instead, you’ll be agreeing to a long-term debt repayment plan to repay your debts using one monthly payment. This is an option that can be used to avoid bankruptcy.

Furthermore, many debt management plans help you be excused from certain extra fees and charges and try to settle on a lowered interest rate (this usually works with unsecured debt).

We usually recommend a tiered approach to deal with debt. One where you work your way through all options ranging from the minimally invasive, like traditional debt consolidation, to more invasive options like credit counselling, consumer proposals, and as a last resort bankruptcy.

2. You Make Just One Monthly Payment

It is perhaps one of the most relieving benefits of entering a debt management program.

A debt management company will help consolidate all of your debt payments into one affordable monthly payment, which the agency will forward to your creditors. With each payment towards debt settlement, you’ll be closer to debt relief.

This means that once you allow a credit counselling company to hand the reins of your debt payments over to a credit counsellor, you’ll have to worry a lot less in regards to your overall budget.

In saying this, there are other options available to obtain a single monthly payment which usually yields better results than a DMP such as a consumer proposal.

3. It Is Not a Free Service

Many companies and agencies providing debt management program services are non-profit organizations whose only goal is to help you with debt settlement, but this doesn’t mean they are free

They sometimes claim to provide a viable, free, solution and help you eliminate debt, but they will usually charge you a monthly fee for their debt settlement services. This fee usually ranges between 5 and 15% of your overall debt. So, if you have a lot of debt, credit counselling fees can be quite expensive.

If you’re in dire, debilitating debt, this might seem like an extra burden to bear on the way to being debt free. However, reduced rates and fees might make up for this if your total debt is low.

This brings us to our next point:

4. It Can Help You Save Money Each Month

One of the most lucrative services offered by a debt management plan is lowering high interest rates , which can be a decent debt solution all on its own.

And even if you can’t get a lower interest or have your fees waived, you’ll still be able to benefit from the ease of having to make only one monthly payment for all of your debts.

Be warned though, while a single payment does make dealing with debt logistically easier if the new payment is equal to the total of the old payments you may still face challenges.

Your debt management program might also free up enough cash flow to actually help you start saving cash every month.

This means you’ll be better able to manage your budget as you advance. So in many ways, you get multiple solutions at once.

However…

5. Your Credit Score May Drop

The obvious benefit of having a DMP as a debt solution is that you can become debt free using a single monthly payments that fits your budget. The unfortunate cost of a DMP is having a poor credit report.

If you are in a severe debt crisis, a lowered credit score is one possible pitfall of getting into a debt management plan.

While renegotiating your debt payments, your credit counsellor can and most likely will make alterations to the payment schedule. This is because not every creditor will agree to the plan initially proposed by your credit counsellor.

The consequence of filing a DMP is that your credit will be negatively affected.

And of course, once you pay back the whole of your DMP and your balance with a creditor has been cleared, they will close the account. This will allow you to rebuild, but usually, only once the entire plan has been paid off.

Although this is a relief, it also means that any good history you have with them will be damaged. But you’ll have to accept this as an unfortunate part of seeking debt relief.

6. You Won’t Be Able to Open New Lines of Credit

It’s pretty easy to guess that, despite the somewhat easy solution it provides, being enrolled in a debt management program has the effect of lowering your credibility as a debtor.

It essentially shows that you can’t borrow money without becoming financially unstable.

As such, you’ll be restricted from opening new lines of credit. Otherwise, you’ll be endangering the privileges offered to you by the debt management company. In addition, you’ll be even farther away from debt relief.

Although this can be limiting, in the long run, it’s also setting the stage for a solution to poor or previously bad money management.

This fact is true among most other invasive debt options as well.

Not to mention…

7. Entering a Debt Management Program Might Actually Increase Your Credit Score

We know this sounds contradictory. And almost everywhere you look, you’ll hear that debt management programs will lower your credit score. But, of course, that makes sense: why should you be allowed to take out more loans when you can’t pay off your existing ones?

That said, in some cases, the lower your credibility, the more space there is for your credit score to rise. Because when you’ve fallen behind by racking up one too many late credit payments, you can—ironically—only go up.

This is because, as time passes and you pay off more and more of your loans dealt through your debt management plan, your credit utilization goes down and the constant negative reporting from your creditors may stop.

But remember this: whether your credit score takes a dive or actually increases, the important thing is that with a DMP and any debt solution program is you will have taken a decision to make your way to being debt free.

And ultimately, you can’t achieve a sustained rise in your credit score unless you pay back all your debts and your incriminating accounts have all been closed.

8. Not All Credit Counseling Agencies Are Created Equal

You can probably already guess by now that no credit counselling agency should be trusted blindly. Especially given that it’s your financial situation in the balance, you have to be careful who you choose to help you pay back your debts.

You have a lot of agencies to choose from to get debt help. As such, you can try to find a non profit credit counseling company that has made it through a comprehensive and extensive certification program in providing debt relief, or better yet, an unbiased debt consolidation company that can assist you in understanding all of your options, not just credit counselling.

Beyond this, look for signs of good organization in the company that you choose to handle your debt management plan.

Look into their record; do they have a history? Do they have good reviews? Do you feel that they are doing their best to offer you the support and information that is crucial for providing debt help? Trust your gut. If something feels off, it probably is.

9. You’ll Have to Say Goodbye to Your Credit Cards

Outside of personal loans and unsecured debt here and there, most people require debt management services to get out of credit card debt.

As such, entering a debt management plan requires you to close all of your existing credit cards, with the condition that you won’t be able to open any new credit card account until you’re clear of all of your debts.

We understand that this can be difficult, especially if you’re accustomed to using your credit cards for everything. But it’s a cautionary measure to prevent you from falling into even deeper credit card debt.

The good news is learning to live without a credit card is usually one of the best habits an individual can learn. In fact, it has been shown that using credit cards can increase spending by as much as 100%.

10. Successful Completion Might Take up to Five Years

Something that might dissuade you from getting into a DMP is the long amount of time it sometimes takes to pay off all your creditors.

The duration of the debt repayment plan drawn up for you by the credit counsellor usually falls anywhere between 2 and 5 years. But, of course, the higher your debt, the longer this time period is likely to be.

However, realistically, this is a necessary trade-off when you’re in a lot of debt and attempting to avoid bankruptcy.

Simply put, this is the present price you must pay for the loans taken out by the past you.

Think of it this way: by the end of the program, you will have repaid all of your debts, and that’s the kind of positive development that will allow you to rebuild your credit.

11. You Might be Able to Get Debt Relief on Your Own

Finally, the most important thing you need to know is that a debt management plan should be the last of your chosen debt relief options as it can be one of the most expensive debt relief options. There are other paths you may take to get out of debt.

It is because, essentially, what these agencies do is contact your creditors and negotiate payment alternatives, and perhaps ask them to consider letting you off with reduced fees and interests.

In fact, the tasks associated with this debt relief option can sometimes be achieved by you alone.

It might initially seem daunting to talk to creditors but remember that they want what you want: for your balance to be cleared. You might find them to be more cooperative than expected.

Start by making a list of all the creditors you have and what you owe them, including interest rates and fees. Next, identify how much you’ll have to pay per month.

Then, take a good look at your established monthly expenses to determine whether some of them can be redirected to debt settlement.

Then attempt to negotiate with your creditors. Additionally, you might want to shut down all your credit card accounts.

Final Words

There are many possible steps you can take to free yourself of debt. A debt management program is only one of many options available. Which one you choose is, ultimately, entirely up to you.

Take a good look at your financial situation and try to gauge as realistically as possible whether you genuinely need help. We suggest reaching out for help sooner rather than later and we’d be more than happy to help you figure out your best option with a free consultation.

And remember, if you are considering any debt relief option like declaring bankruptcy, debt consolidation, or a consumer proposal to pay off your debt we highly recommend speaking with a professional. These options get very complicated, very quickly depending on your circumstances.

Trust your gut. You’ve got this!

This article was written by David Moffatt, a Debt Relief Expert. He has helped assist in creating plans that have helped save Nova Scotia residents over $30 million dollars of consumer and tax debt since 2015. We believe that no consumer should have to struggle with the stress of overwhelming debt. Our debt restructuring strategies can help you cut your debt by up to 80%.

If you are struggling with debt please reach out. It hurts to continue to suffer financially. Halifax Debt Freedom services Halifax, Dartmouth, Bedford, Sackville the entirety of HRM, and all of Nova Scotia.

For this reason, we recommend consumers try and avoid bankruptcy unless it is the absolute best option. So, how do you know if you should be filing for bankruptcy? Well, it is quite easy – we recommend you explore all five of the options listed below. Then, if none of them work or are effective, you can confidently say bankruptcy is your best choice.

The 5 ways to avoid filing for bankruptcy

1. Getting through your debts on your own. You can try things such as:
   1. Getting a second job, or a side hustle, or
   2. Reducing your expenses. The most common ones are eating out, groceries, and cell phone/internet bills.
2. A debt consolidation loan can be an effective option if you have good credit and can comfortably afford the new monthly payment. If you have considerable equity in your house, you can also consider refinancing your mortgage or getting a second mortgage. We do caution against this option, though. While it can reduce high-interest debt payments, such as credit card debt, you are converting unsecured debt to secured debt, which can be dangerous.
3. If your debts are older, you are behind on payments, and you have access to a lump sum of money, debt settlement may be an option. Debt settlement is where you offer to pay less than the full amount as a lump-sum payment to your creditor. Usually, the longer the debt has been behind on payments, the more they may be willing to accept a settlement offer.
4. The problem with debt settlement is that it requires a lump sum of money to be effective. If you do not have access to this type of lump sum and can only afford a monthly payment plan, then you have a final two options to consider:
   1. A debt management plan: This option is offered through a credit counseling company. They will contact your creditors and develop a plan that usually involves paying back 100% of the principle without any interest. A fee is charged, which usually ranges between 5-15% of the overall debt loan. Usually, the monthly payment in a debt management plan is roughly equal to what a debt consolidation loan would be. Because of this, if a debt consolidation loan was already unaffordable, then a credit counseling program will usually be unaffordable as well.
   2. A consumer proposal can also be an effective option to avoid bankruptcy. In fact, it is an alternative to bankruptcy governed by the same law bankruptcy is governed by. A consumer proposal is a legal process whereby a consumer typically offers their creditors more than they would get in bankruptcy but less than the consumer owes. A consumer proposal also eliminates any interest rate that would be payable on the debt.

If you have explored all of these options to avoid bankruptcy and can not make any of these work, you can confidently look at filing a bankruptcy knowing you reviewed everything.

Can I avoid bankruptcy with a debt consolidation loan?

Yes. If you have good enough credit, you can absolutely avoid bankruptcy by obtaining a loan to pay off any of the debts troubling you. Just make sure you can comfortably afford the payment.

Why is it best to avoid filing for bankruptcy?

It is usually best to avoid bankruptcy because of the negative consequences of bankruptcy. The first bankruptcy will stay on your credit report for a period of 6 years following the date of discharge. This is usually for a total of approximately 7 to 8 years. A second-time filing stays on your credit report for a period of 14 years past the date of discharge. It is mainly because of this fact that bankruptcy should be used as a last resort option.

Bankruptcy should also be avoided as most types of debt that can be discharged in this process can be dealt with via other options such as a debt consolidation loan or consumer proposal.

As covered in our consumer proposal vs bankruptcy guide, a bankruptcy often has a much higher payment than other debt programs. This is because a bankruptcy payment is based on how much money you make monthly, your family size, and your assets. It isn’t based on how much you are able to pay at all.

How can I get out of debt without filing bankruptcy?

To get out of debt without filing bankruptcy, you can explore the options listed above. Most consumers are very aware of debt settlement & debt management plans, but many aren’t aware of the other options. Therefore, we recommend checking them out above.

How do I protect myself from bankruptcy?

There are many ways to protect yourself from bankruptcy. The first thing you should do is be very wary of credit card debt and the interest rate associated with them. Credit cards aren’t the only debt that causes people to be pushed over the edge, but they are usually a catalyst in how quickly debt starts to add up.

It isn’t uncommon for us to see credit card debt that increases very quickly when people do not keep these in check. Therefore, we recommend you limit your credit cards to a single card and obtain a low interest rate card.

We also recommend you do not co-sign on any credit products for anyone. The majority of the time, what pushes people to file bankruptcy is unplanned and largely unpreventable. So to minimize your risk by not co-signing anything.

But the biggest piece of advice by far is to establish an emergency fund. The goal is to eventually save up to 3-6 months of your bare-bones living expenses. This does take a while, but you will have a much better financial foundation built for yourself, your money, and your overall risk once you achieve it.

What can you do to prevent your own personal bankruptcy?

To prevent your own personal insolvency filing, you should limit the amount of credit that you extend to yourself. It is very easy to spend money. At the same time, we all have every intention to pay back what we borrowed; life truly does get in the way. Limiting the amount of credit you have access to is the best financial line of defence you can have to protect yourself.

This article was written by David Moffatt, a Debt Relief Expert. He has helped assist in creating plans that have helped save Nova Scotia residents over $30 million dollars of consumer and tax debt since 2015. We believe that no consumer should have to struggle with the stress of overwhelming debt. Our debt restructuring strategies can help you cut your debt by up to 80%.

If you are struggling with debt please reach out. It hurts to continue to suffer financially. Halifax Debt Freedom services Halifax, Dartmouth, Bedford, Sackville the entirety of HRM, and all of Nova Scotia.

Filing bankruptcy requires the services of an LIT (Licensed Insolvency Trustee), formally known as a Bankruptcy Trustee. They are an Officer of the Court. Their job is to investigate your affairs, ensure you are not committing fraud, and ensure you understand how the process works. They are also there to protect the interests of the creditors as well as ensuring your rights as a consumer are respected. These rights include things such as ensuring creditor calls stop, making sure you understand the process.

Due to their role, a licensed insolvency trustee is unable to act as a true advocate for the consumer. In fact, if they were to do so it would jeopardize their license.

Are all Licensed Insolvency Trustees in Nova Scotia the same?

While all Licensed Insolvency Trustees are licensed by the federal government and use the same ‘rule-book’, the bankruptcy and insolvency act, not all licensed insolvency trustees interpret the ‘rules’ in the same way. This means from one trustee to another you may end up paying, or saving thousands of dollars. This is why it is important to interview several trustees and other debt professionals (and ensure you are reviewing all other options, like a consumer proposal)

Best Bankruptcy Trustee Nova Scotia

Licensed Insolvency Trustees were formally known as bankruptcy trustees until most recently. As mentioned above, every trustee is different.

This way all your options can be reviewed, including those outside the bankruptcy act.

We’d love to be that resource no matter the options you are pursuing. We promise the following:

• We provide a free consultation that is completely confidential.
• We will ensure you understand every option available including the alternatives, like a consumer proposal, and all other options.
• Our role is to exclusively represent you.
• We are a top-rated debt relief company in Nova Scotia and we take that very seriously.

If you want to setup up a free confidential consultation to discuss how we can help you with your financial situation click here to become debt free.

How do bankruptcies work in Nova Scotia?

At a fundamental level, bankruptcies are based upon how much income you make and what type of assets you have. To learn more we highly recommend reading our in-depth guide on bankruptcy in Nova Scotia.

What do you lose when you file for bankruptcy?

The majority of consumers in Canada lose absolutely nothing when they file, despite having assets. This is because there are provincial and federal exemptions to assets that protect them from creditors. While a larger list is available in our bankruptcy guide, linked above, please find the two most common exempt assets in Nova Scotia.

• A vehicle that has a value of up to $6,500, and
• RRSPs except for the last 12 months of contributions.

How do you file bankruptcy in Nova Scotia?

The process of filing for bankruptcy in Nova Scotia is no different than filing for bankruptcy in any province across Canada. If you owe at least $1,000 and are insolvent (generally defined as either having more debt than assets and/or as not being able to pay your bills as they are due) you can file bankruptcy.

When you meet with your debt professional they will outline all of your options, ranging from budgeting all the way to bankruptcy and everything in between, including consumer proposals and debt consolidation. Ultimately, the decision to file bankruptcy is yours. However, your chosen professional will assist you in understanding the true pros and cons related to the various options.

If you are considering any sort of debt relief and would like a professional opinion we would be more than happy to provide one! Contact us here.

This article was written by David Moffatt, a Debt Relief Expert. He has helped assist in creating plans that have helped save Nova Scotia residents over $30 million dollars of consumer and tax debt since 2015. We believe that no consumer should have to struggle with the stress of overwhelming debt. Our debt restructuring strategies can help you cut your debt by up to 80%.

If you are struggling with debt please reach out. It hurts to continue to suffer financially. Halifax Debt Freedom services Halifax, Dartmouth, Bedford, Sackville the entirety of HRM, and all of Nova Scotia.

What is debt counselling?

Debt counselling is like any other form of counselling. A consultant, debt relief specialist, or counsellor will sit with you to better understand your situation and provide guidance in support to help you get out of debt. They will often provide recommendations to speed up the process and be your advocate through the process. Their goal is to help you become debt free as quickly as possible.

Is debt counselling a good idea?

It is important to reach out and seek professional advice any time you are struggling with a debt or financial problem. A consultation with a reputable debt solution firm will be completely free and come with no obligation or pressure. They will go through every single debt relief option you have in solving your debt problem. Don’t be shy to ask your debt counsellor:

1. Who do you work for? Their answer should be you, and only you.
2. How much do you charge? They should be able to provide you a clear dollar and cents answer.
3. Do you support me once my debt is paid off? Most firms do not which is unfortunate as the repeat rate for debt solution firms is extremely high at an estimated 25%. We are proud that ours is less than 3%.

What does a debt counsellor do?

A debt counsellor educates you on all of your options, explains the pros and cons of those options as they relate to your specific situation and helps guide you towards the right option. This will typically occur within a free debt consultation. If you choose to engage them to assist you further they will help you implement the chosen plan. They will walk you through it step by step and ensure you take all the appropriate steps and actions to not put yourself in a vulnerable position.

Are debt counsellors free?

There are no free debt solution firms out there, despite popular belief and some deceptive marketing practices. Debt solution providers are either paid by (and work for) the consumer or the creditor. We believe it is impossible to work for both in a truly unbiased fashion.

In saying that, you can expect to undergo a full review and consultation period completely free of charge as well as have an understanding of exactly what is going to be charged by your debt counsellor. This should leave no surprises in terms of what a potential outcome could look like and what the costs associated there are.

What are the disadvantages of debt counselling?

Debt counselling is not a specific program, rather it is a complete review of your situation to help you come up with a plan of action to deal with your debt. Because of this, there are no true disadvantages to debt counselling.

How does debt counselling affect your credit?

Speaking with your debt specialist doesn’t impact your credit. Only when you implement a plan that has a credit impact will your credit actually be negatively affected. What we have found, however, is consumers who are struggling to pay their bills often times have bad credit to begin with. Because of this, debt programs can actually help improve credit over time.

This article was written by David Moffatt, a Debt Relief Expert. He has helped assist in creating plans that have helped save Nova Scotia residents over $30 million dollars of consumer and tax debt since 2015. We believe that no consumer should have to struggle with the stress of overwhelming debt. Our debt restructuring strategies can help you cut your debt by up to 80%.

If you are struggling with debt please reach out. It hurts to continue to suffer financially. Halifax Debt Freedom services Halifax, Dartmouth, Bedford, Sackville the entirety of HRM, and all of Nova Scotia.