Debt counseling, also known as credit counseling or debt management, is a legal process designed to help persons in debt through a unique processes of orientation and counseling. It is carried out by an accredited debt counseling agency or counselor. The credit counselor serves as the intermediary between the debtor and the creditors in the repayment of debts owed.
In Canada, the process of debt counseling is a debt consolidation program in which a credit counselor mediates for you and arranges with your creditors on the modalities of your debt payments.
The credit counselor will help you in organizing your debt payments, review your finances, budget your expenses, rebuild your credit score, get you out, and help you stay out of debts.
How the debt counseling process works in Canada
The debt counseling process involves working with a debt counseling agency that will offer advice on how to settle your debts and other financial recommendations. The services rendered by a debt counseling agency are to help you with managing your debts and stay out of debt.
Therefore, when selecting a debt counseling agency, you must ensure that your preferred choice is an accredited agency in Canada, and the fees charged are what you can conveniently afford. The aim of going for debt counseling is to help you solve your debt problems, not add to it.
Factors to consider in choosing a debt counseling agency in Canada
Both non-profit organizations and profit-oriented agencies render the debt counseling service. Among other measures, choosing a credit counselor entails doing the following:
- Do proper research of the debt counseling agency or agent, the services rendered, and the reputation of the agency.
- Ensure that your preferred agency or counselor is duly accredited and registered with relevant national and/or provincial regulatory authorities in Canada.
- Do proper research on the ratings given to the debt counseling agency or counselor, and check for any unresolved complaints on Better Business Bureau (BBB).
- Similarly, find out about the cost of the service and other fees of the different agencies before deciding which one to use.
- Ensure that you are satisfied and comfortable with the credit counselor assigned to you by any counseling agency. This is the person you will work with throughout the whole process of settling or paying off your debts, and the person that will be representing you before your creditors.
- Ensure that the contract with the debt counseling agency is well understood. The contract should include the amount of fees charged, the timing of payments, the role to be played by you, and the agency in handling your debts. Be sure to obtain a personal copy of the contract.
How to find a debt counseling agency
Finding a reliable debt counseling agency is important in ensuring that you are debt free. Some agencies are out to take advantage of people’s financial situations, hence, you should be careful in your choice of a debt counseling company.
Find below, some of the organizations and associations guiding the conduct and practices of debt counseling agencies in Canada:
- Credit Counseling Canada (CCC).
- Canadian Association of Independent Credit Counseling Agencies (CAICCA).
- Association for Financial Counseling and Planning Education (AFCPE).
- Canadian Association of Credit Counseling Services (CACCS).
- Ontario Association of Credit Counseling Services (OACCS).
- Canadian Center for Accreditation (CCA).
Services rendered by a certified debt counseling agency in Canada
An accredited debt counseling agency or company is among other things, saddled with the responsibility of assisting clients who are in debt situations to manage the processes of their debt payment, as well as ensuring that the client stays out of debt through financial advice and planning, thereby improving the financial situation of the client.
Therefore, a qualified and certified credit counselor will render the following services:
- Do a proper assessment of your financial situation and debt status, which includes your income, expenses, assets, and unsettled debts to understand the full debt problem.
- Provide you with different options available for settling or paying your debts, and what each option entails.
- Organize your debts in terms of the amount owed and the interest payable on each.
- Set new goals for your finances and help you manage your expenses.
- Help you develop a personal budget plan and teach you how to follow it.
- Assist you in creating an emergency fund to augment your income.
- Guide you towards the process of improving your credit ratings.
- Help you offset your debts and live a debt-free life.
Some frequently asked questions
- What is the difference between debt counseling and informal debt settlement?
Informal debt settlement involves a procedure whereby you personally contact your creditors to check if they can provide you with any debt relief.
Debt counseling, on the other hand, consists of a procedure whereby your credit counselor will be your intermediary and contact your creditors to negotiate a payment proposal and provide you with other financial services.
- How do I qualify for debt counseling?
As long as you are of the age of majority and in need of financial service, you are entitled to get help from any debt counseling agency.
- Will my creditors leave me alone while using a debt counseling service?
Your creditors will be instructed to deal with your credit counselor from the point of signing up with a debt counseling company.
If you continue to receive calls from your creditors, you should refer them to your credit counseling agent/agency as long as the creditor has agreed to the terms set by the credit counselor, and you are meeting up with your payments.
Before committing yourself to any debt program, you must speak with your preferred debt counseling agency or counselor on the various options available to settle your debts and the best that suits your situation.
The reason for this is that there are diverse options for paying a debt in Canada, depending on the peculiarity of the debt situation.
It is essential to consider the pros and cons of each opportunity presented to you and carefully act on your preferred option. Your credit counselor can guide you on any area that is not clear to you.