Lower your monthly payments
Reduce credit card interest rates
Waive late fees
Reduce collection calls
Have only one monthly payment
Debt Reduction Plan is a process where we arrange and make an offer to your creditors to reduce your principal and stop interest so you can pay off your debts within a period of 3-5 years. Debt Reduction Plan is favourable for those debtors who want to keep their properties, and have a regular source of income.
Repay only a fraction of the debt owed with the maximum repayment period between 3-5 years
Not in jeopardy of losing other assets and their house or car
Creditors and collection companies are no longer able to contact them for payment as it is the law
Interest will stop accumulating from the date of filing
Most of the wage garnishments will immediately stop
With a debt reduction plan, you relief yourself of an unfathomable debt, then you will get back in control over your life and financial status.
You could bargain with your creditors to pay back a percentage of what you owe, depending on how mush. For instance, you could bargain to pay back 30% of your debt supposing you owe $50,000 (meaning all you have to pay back is $35,000).
With a debt reduction plan, your debt as contained in the signed contract (proposal) is merged into a workable monthly payment, which will be paid to your representative. You could make a bigger payment though, if your circumstances allow it.
When you make sign a contract, all charges on your credit cards, and tax liabilities are suspended – implying you won’t have to accumulate any further interests.
With debt reduction plan, you do not have to put up with aggressive phone calls received from collection organizations; your creditors no longer have the right to get in touch with you or take further actions.
If you have money save in RRSPs and RESPs; you have a car and a home, a debit reduction plan will see to it that these possessions are not taken away from you!
Since it is allowed for a payment proposal to span across five (5) years, it is advisable that you extend your payment period so that you can better manage it (i.e. your payment).
Debt reduction plan will protect you from liquidation.
|Settling debts on your own||Settling debts with professional help|
|Negotiation||You need to decide how much you can pay every month||The settlement company analyzes your financial condition and decides upon an affordable payment|
|Mode of payment||Usually you need to make one-time payment towards each of your accounts||You need to pay an agreed upon amount to the settlement company every month|
|Fees||You don’t have to pay anything other than the settlement amount to the creditors||You need to pay a certain amount as professional fees|
|How to decide||You want to save more money, but you should have proper negotiation skills to convince your creditors to agree to settlement||You want complete professional guidance to settle your debts, though you’ll have to pay a fee for the services provided|
After that, you'll need a letter of acceptance of the verbal offer. Finally, you'll need a proper debt settlement agreement letter. You can take a print out of debt settlement letters from here.
When you are preparing a deal for your creditors, some principles must be followed as to the debts which can be included. Basically, a deal should be made available to unsecured creditors.Your unsecured debts should be listed. Some of these include
Credit card debts
Student Loan ( 7 years old)
Secured Debts in Debt Reduction Plan
It is impossible to modify a secured debt using a debt reduction plan(proposal). A secured debt as the phrase implies, means that the debt has an asset backing: such as your car (should you obtain a vehicle loan), or your house (in case of a mortgage). If payment is not made on a secured debt, legally, the creditors have the right to acquire the asset agreed upon (creditors may even sell off the asset to recover their money). As long as the consumer proposal makes it clear, any loss on the agreed asset is an unsecured debt, which can be included in your debt reduction plan.
Assuming your secured debt, e.g., mortgage or car loan is in good standing, it will not be possible for creditors to demand that you surrender your asset, because you are in debt reduction program. If there are other faults, the creditors may be able to terminate the deal. If a deal is terminated, the loss may be included in the proposal.