- By: DebtEase Solutions Team
- September 25, 2024
- Call to compare 1-888-529-5649
Can a Debt relief Program in Canada Help with Collections
Common Questions About Debt relief Program in Canada
Can a Debt relief Program in Canada Help with Collections?
Yes, you may include debt collection accounts in a Debt relief Program in Canada (DMP), provided the collector agrees to accept payments through the program. However, you might lose some of the primary benefits of the DMP. Typically, a debt management program aims to reduce or eliminate interest charges, making it easier to pay off debts.
Once a credit card debt is transferred to a third-party collector, they can no longer impose additional interest charges. Therefore, there are no interest costs to mitigate with a collection account. If you only have a couple of collection accounts and want to halt collection calls while paying them off, you can include them in your plan. However, if most of your debts are in collections, you might want to consider alternative solutions, like a debt settlement program.
How Long Does It Take to Set Up a Plan?
The initial consultation for credit counseling, which assesses your eligibility for the program, typically lasts about 30 minutes to an hour. However, your actual DMP will only commence once your creditors agree to accept payments through the program. This agreement can take several weeks or even months, depending on how many creditors you have and how quickly they respond after consulting with the credit counseling agency.
How Long Does a DMP Last?
A Debt relief Program in Canada can last a maximum of 60 payments, meaning you could be debt-free in as little as five years. Most participants find that they complete their plans in about 36 payments or three years. The duration of your DMP will depend on how much you can afford to pay each month. The credit counselor will work with you to determine a monthly payment that fits your budget, influencing how long your plan will last.
Is a Debt relief Program in Canada Legally Binding?
No, a DMP is entirely voluntary. Unlike consumer proposals, both you and your creditors willingly enter into the agreement facilitated by the credit counseling agency. You can opt out of the plan at any time if you decide to pursue other methods of debt repayment.
What If I Can’t Afford DMP Payments?
Before you start, the credit counseling team will help you create a budget that accounts for your income and expenses. However, unforeseen circumstances can arise. If you anticipate difficulty making a payment, reach out to the agency administering your DMP. They may assist you in adjusting or temporarily reducing your payment to help you remain enrolled in the program.
When Is the Best Time to Use a Debt Management Program?
DMPs are most beneficial when the majority of your debts are still held by original creditors. If you find yourself falling behind or fearing you won’t be able to keep up with payments, a DMP can help you regain control. Generally, it’s advisable to enroll in a DMP when your total debt exceeds $10,000, especially if you have poor credit and don’t qualify for DIY solutions but wish to mitigate future credit damage.
If you’re struggling to make ends meet, contact a credit counseling agency for assistance in evaluating your options.
Who Offers Debt relief Program in Canadas?
All DMPs are provided through credit counseling agencies, which can be for-profit or non-profit organizations. It’s recommended to select a non-profit agency, as their fees are typically lower. Additionally, non-profit organizations are more likely to have established relationships with a broader range of creditors.
Will a Debt relief Program in Canada Affect My Mortgage or Ability to Get One?
If you already own a home, a DMP will not impact your current mortgage. In fact, it may help you manage your budget better, making it easier to afford mortgage payments and avoid bankruptcy, which could risk your home.
A DMP won’t prevent you from obtaining a mortgage, but it may limit your ability to open new revolving credit lines during your enrollment. While the program will be noted on your credit report as an R7 rating for each debt included, this may be visible to mortgage lenders and could negatively affect your credit score. As a result, lenders may scrutinize your finances more closely, potentially leading to a lower loan amount and higher interest rates.
Getting Started
If you believe a DMP could be the right solution for your situation, here’s what to do next:
- Gather Necessary Information:
Collect the details needed for your free debt evaluation, including:- Recent credit card statements with account balances, APR, and creditor names.
- A summary of your total monthly income, including wages, side business income, and child support.
- Estimates of your total monthly expenses, such as bills and recurring costs like groceries and gas.
- Research Credit Counseling Agencies:
Look for a registered non-profit agency that:- Is well-rated by the Better Business Bureau.
- Has positive reviews on independent third-party sites.
- Offers a free debt evaluation.
Once you find a suitable agency, call them to request your evaluation. By the end of the call, you should feel confident in their ability to assist you with your debt. If you don’t feel comfortable, you’re under no obligation to enroll; simply thank the counselor and consider reaching out to another agency.
Questions to Ask Before You Enroll
Before committing to a DMP, ensure you have answers to the following questions:
- What will your monthly payment be?
Your credit counselor should provide an estimate of your monthly payment once enrolled. Remember, this figure is only a preliminary estimate and may change based on creditor agreements. - How many payments will it take to complete the program?
You should know the expected number of payments, with the average DMP lasting approximately 36 payments. A maximum of 60 payments is permitted. - What if you encounter payment difficulties?
The credit counseling team is there to assist you. If you anticipate issues with a payment, contact them right away for possible adjustments. - What resources are available during enrollment?
Many credit counseling agencies offer free financial literacy programs to help clients develop better financial habits. Take advantage of these resources to learn about budgeting, saving, debt management, and maintaining a good credit score.
Get Started Today
