If you’re dealing with a stressful life event or you and your partner are having a hard time communicating, it’s common to go to a counsellor for advice. The same is true if you are struggling with money issues. You can seek assistance from a credit counsellor to learn new tools and tips to help you get out of debt and manage your finances.
If you’re in a position where you can still make your monthly payments, but it’s a challenge, you might be a good candidate for credit counselling in Victoria.
What is credit counselling?
Consumer credit counselling services include individual counselling sessions and group courses that provide helpful financial tools and knowledge. Some credit counsellors also offer debt management planning to consolidate unsecured debts.
A credit counsellor might start a session by getting the current state of your financial situation. Depending on your situation, they might provide advice on how to create and stick to a budget or how to manage your credit. If your financial situation is dire, they might recommend that you speak to a Licensed Insolvency Trustee (LIT) about an alternative debt relief option, such as a Consumer Proposal or Bankruptcy.
While you can find credit counselling through a variety of not-for-profit and for-profit providers, it’s important to look for a counsellor with the appropriate specialized education and training. Unfortunately, people can legally call themselves credit counsellors even if they don’t have the required training. An LIT is a professional that has the education and experience needed to act as a qualified credit counsellor.
When looking for credit counselling in Victoria, BC, remember, any offer that sounds too good to be true probably is. Be wary of any company or counsellor that offers a quick fix to increase your credit score or guarantees they can reduce your debt. If you’re unsure about the legitimacy of a credit counselling agency, you can check the Better Business Bureau (BBB) to see if complaints have been made against them.
What is a debt management plan?
Some credit counsellors offer debt management planning. A debt management plan, also known as a debt consolidation program, is an informal repayment plan created by the credit counsellor and presented to your creditors on your behalf.
The goal of a debt management plan is debt consolidation. This strategy can help to simplify your debt repayment process by combining your unsecured debts into one monthly payment.
While a credit counsellor can request that your debt payments are reduced or that your interest payments stop, there is no guarantee that this will happen. It is completely up to your creditors to decide if they want to work with your credit counsellor and accept their proposal. In most cases, you will have to repay the total amount of your debt, but you might be able to avoid paying interest or extend the amount of time you have to make your payments.
Will a debt management plan affect my credit score?
A debt management plan will have a negative impact on your credit score. However, in most cases, a note is added to your credit report stating that you are working with a credit counsellor to make regular debt payments.
This information will stay on your credit report for two years after you finish paying your debts. Anyone who looks at your credit report during this time (creditors, landlords, potential employers) will see this information. This can make it more difficult to obtain credit or get approved for a rental.
Alternatives to credit counselling
If you’re having financial trouble but you’re still managing to pay off your monthly debts, credit counselling might work for you. However, if you’re at a point where you can’t afford to make your payments, it’s time to speak to a Licensed Insolvency Trustee. An LIT can review alternative options, including a Consumer Proposal or Bankruptcy.
In a Consumer Proposal, you work with an LIT to develop a proposal that your LIT negotiates with your creditors. In most cases, you’ll only pay a percentage of your total debt and no interest. The amount you pay is based on how much you can realistically afford, and you have up to five years to complete the terms of your proposal.
During a Consumer Proposal, your creditors are not allowed to contact you or continue garnishing your wages. Once your creditors agree to the proposal, they can not withdraw from the agreement as it is legally binding, unlike a debt management plan.
A Consumer Proposal will negatively impact your credit score for three years after you complete the proposal.
Bankruptcy is usually a last-case resort for those who can’t afford to pay even a portion of their debt. While it can feel scary and even embarrassing, Bankruptcy provides an opportunity for a fresh financial start for those who have fallen on hard times.
Bankruptcy is a federally regulated process administered by a Licensed Insolvency Trustee. You may have to surrender some of your assets (some assets are exempt) in exchange for the discharge of your debts.
A first time Bankruptcy will negatively impact your credit score for six or seven years, depending on the province you live in. A second Bankruptcy will stay on your credit report and negatively affect your score for 14 years after you complete your Bankruptcy.
Need Help? British Columbia Credit Counselling and Debt Services
Whether you’re just getting by each month or you can no longer pay your bills, a Licensed Insolvency Trustee can help you figure out what to do next. Licensed Insolvency Trustees have the expertise and knowledge to provide the entire range of debt management and debt relief options, from debt counselling to insolvency proceedings. In fact, an LIT is the only federally regulated professional that is authorized to administer Consumer Proposals and Bankruptcies.
If you’re interested in credit counselling and debt help in Victoria or you just want to speak with an LIT about your debt options, reach out today for a risk-free 30-minute call at 1-888-371-8900 or visit us online. We Can Help.