There have been two areas that have grown tremendously on the internet in the last two years concerning debt. The granting of payday loans online has risen dramatically causing a number of people to have to resort to dealing with runaway credit. This has led to the second area of growth, Debt Consultants.
In looking at various web sites, I have come across a number claims that appear on a regular basis and are there to instill confidence in the debtor. The first such claim is that a debt consultant does not need court approval for a debt management program. This is very true whereas, with a consumer proposal, court approval is necessary. Since they both have the same effect on your credit history, this seems to be a favourable argument for the debt consultant. What they do not say is that the decision of the creditors in a consumer proposal is binding on ALL creditors whether or not they voted in favour of the proposal.
With a debt management program, a creditor who votes no has the option of not participating. What does this mean to you? You will commit your funds available for debt repayment to the Debt Management Program and if someone says no, they will want to arrange payment of their debt with you directly. If you cannot make arrangements with them, they have the right to proceed to small claims court, obtain a judgment and garnishee your wages.
Also there are certain creditors who will always refuse to participate including The Canada Revenue Agency and Payday Loan Companies. Why is that? Quite simple, most people who owe income taxes owe every year, so there will be four to five years owing by the end of the program. And Payday Loans work on a short term and waiting for five years is not how they operate.
They all talk about reducing the interest in the arrangements that they make. This may be very possible; however, in a Consumer Proposal, the interest STOPS at the date of filing of the consumer proposal. This is not open for negotiation as in a Debt Management Program.
A number of the Debt Consultants say they will contact the creditors. The non profit companies, will contact them on a punctual basis; however, a number of the other Debt Consultants do not contact the creditors until they have collected their fees. This may take a few months, and people report to me that after two months, they start getting phone calls demanding payment because the Debt Consultants have not contacted the creditors as yet. When you file a Consumer Proposal, all the creditors that you name to the Trustee have a package mailed to them within a week of you signing the documents. This is required by law.
On one hand you have no protection by law, some or all the interest still payable, the creditors option to participate or not and notification at the discretion of the Debt Consultant versus protection from the Bankruptcy and Insolvency Act, all interest stops at the date of filing so your payments go to principal, the creditors are bound by the decision of the majority of creditors, and notification is required immediately after you file the Consumer Proposal.
If you are looking for protection and a guaranteed end to your debt problem, you must see a licensed Bankruptcy Trustee to file a Consumer Proposal because the trustee is an officer of the courts and the consumer proposal is court approved. The first visit to Hoyes Michalos is free, and the trustees fees are ALL included in the proposal. If a consumer proposal makes the most sense to you, we would be pleased to help you with your debt problems.