Debt Counseling in Toronto - Is it an Option to Pay Off your Debt?

In Toronto, debt counseling can help people who are grappling with financial complexities find the best strategy to pay off their debt so that they can pull themselves out of deep financial trouble. The process may involve a range of debt-recovery practices, including one-on-one counselling, group courses and seminars and, if necessary, a long term repayment plan called a Debt Management Program or DMP for those who are seriously indebted.

If you think this may be the option to help you regain control over your financial life and stop the collection calls, it may be necessary to review all the steps involved in the process.

Step 1 - Initial meeting with the debt counselor

Once you’ve chosen a counselor who is reliable and competent, you will need to hand over your personal and financial information for review. This step usually involves a quick review of your overall financial situation and a discussion of possible solutions that will best meet your needs.

Step 2 - Financial analysis

The second step of the process will involve an in-depth assessment of your overall financial situation. This will include summarizing in detail your monthly living expenses, sources of income, and debts. The debt counselor will make a list of all your assets and all your sources of income and then compare these to a list of all your regular and irregular expenses. The comparative analysis will reveal if your current monthly living costs exceed your income after making any debt payments. At this point, you will be able to see if you are living with your means and how much your total debt load is.

In addition to what has already been accounted, the counselor will also go over your monthly statements from various creditors and help you understand how surcharge fees, in addition to high interest rates, are increasing your balances even with irregular payments and buying restraints. This assessment will help you see a clear picture of how quickly your debts are growing and how serious your debt problems are.

Step 3 – Finding solutions

Part of the debt counseling process will involve a discussion on potentially increasing your sources of income, cutting back on your living expenses and other actions you can take to help reduce expenses until your financial situation improves.

At this point, if the counselor deems that it is the best solution to pay off your debt he can recommend that you go through a debt management program (DMP). A DMP is not a financial loan, but a voluntary repayment program that involves a consolidation of payments to help you pay off your debt within four to five years maximum.

Once you decide to enroll in a DMP, your counselor will contact your creditors and ask for their participation in putting your debt management plan to work. In the process, your counselor can negotiate with your creditors to reduce or eliminate interest rates and other fees that were charged on your debts.

It is important to know that not all types of debt are covered in a debt management program. Usually, only unsecured debts such as credit cards and student loans are included. Secured debts, like a car loan or a mortgage are generally not covered as these assets can be repossessed by your creditors in the event you fail to make payments.

Your DMP contract will require you to make regular payments which are deposited into a trust account. Your counsellor will use the funds to pay out your creditors, usually every month and depending on the terms of your contract.

Debt counseling in Toronto has provided many Canadians with an alternative to be able to repay their debts in full and to avoid filing for bankruptcy. However, it is not an option available to everyone. You have to qualify for the program and that means that you can afford to make the regular payments and are able to adhere to contract stipulations. You can consult with a debt counselor, a credit counseling company or, better yet, a licensed insolvency trustee who will help you to understand all your options fully. Of these experts, it only the licensed insolvency trustee who has the capacity to explain all the other options that are available to you for paying off debts as well as the legal consequences that are involved in each.