On an average day, you make multiple financial decisions. Yet, unless you grew up with financially savvy parents or pursued a degree in economics, you may have never learned how to create a budget or properly manage your credit.
School teaches basic skills like reading, writing, and critical thinking. However, many curriculums don’t include any financial education. So it shouldn’t come as a surprise that many Canadians struggle with money.
Luckily, there are helpful resources you can turn to, including credit counselling in British Columbia. A qualified credit counsellor can help you fill in your financial knowledge gaps and provide practical tools to help you overcome debt issues and manage your personal finances.
What is Credit Counselling in British Columbia?
Credit counselling (also referred to as debt counselling) is a process that helps individuals solve their financial problems.
In a credit counselling session, your counsellor will work with you to understand the root causes of your debt problems and give you information and tools to avoid these problems in the future. Your counsellor might cover topics such as:
- Credit use
- Debt consolidation
- Money management
- Credit consolidation
- Debt consolidation
What is a Debt Management Plan?
Some credit counsellors offer a debt management plan, which is a form of debt consolidation. If you enter into a debt management plan, your counsellor negotiates with your creditors to consolidate your debts into one monthly payment.
A debt management plan does not eliminate any of your debt. You still have to repay the total amount you owe, but in certain cases, you can eliminate some or all of the interest. Your credit counsellor might also be able to negotiate with your creditors to increase the amount of time you have to repay your debts.
Your creditors do not have to agree to negotiate with your counsellor. A debt management plan is completely voluntary. Even if your creditors agree to participate in the debt management plan, they can still use collection agencies to try and get back any money you owe.
Before signing up for a debt management plan, make sure you understand if it will even save you any money. If the credit counselling agency charges a fee that is higher than the amount you would save on interest payments, it’s not worth it. In this case, you are better off speaking with a Licensed Insolvency Trustee (LIT) to explore other debt help options.
Will a debt management plan affect your credit score?
A debt management plan will show up on your credit report for two years after you pay off your debts, and will negatively impact your credit score. Any lender or creditor who looks at your credit report will see that you are enrolled in a debt management plan, and this can make it more difficult for you to borrow money or secure credit until it comes off of your report.
Who is Debt Counselling For?
If you are having a hard time managing your money, but you’re not in a position that requires filing for a Consumer Proposal or Bankruptcy, then you might be a good candidate for credit counselling. While credit counselling will not eliminate your debt, it is a tool that can help you get your finances back on track over time. A qualified credit counsellor can provide the knowledge and support you need to get out of debt and build a more financially secure future.
How to Find Credit Counselling in British Columbia
Not all credit counsellors are created equally. While many companies offer consumer credit counselling services, this does not guarantee that they are qualified credit counsellors. It’s important to do your research before paying for credit counselling services. If a company claims they can solve your debt problems quickly, or easily fix your credit score, these are often red flags. Usually, if it sounds too good to be true, it is.
When you seek counselling through a Licensed Insolvency Trustee, you can feel confident in their qualifications since, as all LITs are accredited by the federal government. You can also feel confident in their prices, as the cost of all LIT services is federally regulated.
Alternatives to Credit Counselling British Columbia
If your debt has reached a point where you are no longer able to pay your bills each month, your Licensed Insolvency Trustee might suggest a more formal debt relief option, such as a Consumer Proposal or filing for Bankruptcy.
If your debt does not exceed $250,000 (excluding your mortgage on your primary residence), you might consider filing a Consumer Proposal.
A Consumer Proposal is a legal process that can only be administered by a Licensed Insolvency Trustee. During the process, you work with an LIT to develop an offer to pay your creditors a percentage of what you owe, extend the time you have to pay your debt, or both. A Consumer Proposal allows you to keep more of your assets than if you file for Bankruptcy and impacts your credit score for a shorter period of time.
If your debt exceeds $250,000 or your Consumer Proposal was rejected, you might have to file for Bankruptcy. While this may feel like the worst-case scenario, the purpose of Bankruptcy is to help people who are down on their luck get a second chance.
In Bankruptcy, you will have to forfeit some of your assets in exchange for the elimination of most of your debts. The Bankruptcy will also show up on your credit report and negatively impact your credit score for up to seven years, or 14 years if you’ve declared Bankruptcy more than once.
Like a Consumer Proposal, a Licensed Insolvency Trustee is the only professional authorized to administer a Bankruptcy proceeding.
Credit Counselling British Columbia – We Can Help
When it comes to your finances, knowledge is power. Now is the time to learn how to manage your money. A Licensed Insolvency Trustee can assess your financial situation and help you decide if credit counselling or another debt option is right for you.
If you and your LIT determine that a more formal debt relief option is needed, an LIT is qualified to administer the full range of debt solutions, including a Consumer Proposal and Bankruptcy.
You don’t have to deal with your debt alone. If you want help, reach out to Allan Marshall & Associated today. Give us a call at 1-888-371-8900 or fill out our online contact form to schedule a free, no-obligation consultation. We look forward to speaking with you.