Debts out of control?

If your debts have gotten out of control you may consider entering into credit counselling. Here's what you should look for and what to expect if you do.

Don't be scammed

Credit counselling services can be a real boon to the consumer. But not all agencies are above board. To be sure that you're dealing with a non-profit, professional organization start with either aCredit Counselling Canada memberor one of the other agencies recommended by Canada's Office of Consumer Affairs (their list is availablehere).

Other organizations may charge higher fees or in some cases retain a portion of any payments you make through them.

Once you've chosen your agency, here's what to expect:

First consultation

Some agencies offer online or telephone support for your first session, but others will book an in-person appointment. In most cases this first appointment is free.

Your counsellor should be professional, friendly, and non-judgmental. Your information should be kept entirely confidential; if you are not sure about the agency's policies, ask.

In order for a session to be valuable, you will need to provide a fair amount of information: income statements for at least the last two pay periods (or longer, particularly if your income is irregular or you are self-employed); monthly expenses; assets; and debt information, including the last monthly statements if at all possible. Many agencies provide worksheets on their websites, or even online calculators, to help you gather the information.

Services offered

The primary goal of most credit counselling agencies is to support you in achieving financial stability not just by offering education and information, which agencies often do, but also by coming up with one or even several plans of attack specific to your finances and situation. Of course implementing the plan will be up to you.

Depending on your needs this plan may include:

Budget and money management coaching:when your debt load is manageable on your own, then it's just a matter of making sure that you have a clear budget and a way to meet all your commitments. A counsellor will go through the plan with you. Often the agency will also offer group workshops and support groups to help you stay on plan and meet your goals.

Third party intervention:This is a service used when you need a mediator to talk to a creditor on your behalf for example, to delay payments until an asset is sold, or to extend payments over a longer period of time. The counsellor negotiates for you once and then steps back out of the picture, leaving you to deal with the creditors from that point forward.

Debt management programme:If you have a high debt to income ratio, but you still have some disposable income left after paying your basic expenses, you may qualify for an agency's debt management programme. In this programme you pay the agency a single monthly payment that is redistributed to your creditors by the agency on your behalf. Often the agency is then able to renegotiate interest rates with your creditors, as statistics show that the debt is more likely to be repaid through such a programme.

Bankruptcy referrals and counselling:many agencies offer the required bankruptcy counselling that people filing for bankruptcy are required to attend. They may also refer you to a bankruptcy trustee in order to take next steps.

Life crises or unexpected downturns can affect anyone's financial situation. But if you're considering credit counselling, it's worth going in for that first consultation. There is expert help available.

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