THERE'S A TIME AND A PLACE FOR EVERYTHING
Despite what many companies say, in reality debt settlement is a very niche solution. Although by far the single most beneficial solution for debt laden consumers with access to a lump sum of cash, debt settlement can be detrimental if the consumer has not defaulted on their payments yet, or does not have the ability to raise the amount of the settlement in its entirety. Scheduling a free debt settlement consultation should be the first thing any home-owning consumer does before even considering speaking with a trustee or credit counsellor. This is simply because if implemented properly, the debt settlement strategy can save a substantial amount of money with no adverse effect to the credit bureau; provided the accounts in question are already past due.
WHEN SHOULD YOU CALL A TRUSTEE?
The only time to call a trustee is after an unsuccessful attempt to source a means to borrow the money to arrange a debt settlement. A bankruptcy is public record, and that means exactly what it sounds like; anyone that looks you up will know. This makes obtaining any financing extremely difficult for an extended amount of time, and is near impossible if the consumer owns a property with any amount of equity in it, or makes $2,000 a month more than their basic living expenses.
IS CREDIT COUNSELLING A GOOD IDEA?
Credit counselling should never be considered a viable option. It is recorded as "orderly debt repayment" on the credit bureau, which makes lenders cringe and involves the creditors getting paid in full. Some credit counsellors are not for profit, this is because they're actually funded by the banks as an alternative to collection agencies. This way the banks recover the whole balance without dealing with complaints about aggressive collectors. This recourse can be taken without any fees by the consumer themselves, and without the negative effect on the credit.
WHAT EXACTLY IS A CONSUMER PROPOSAL?
Trustees push consumer proposal because it was created as a way to allow them to charge larger fees on a broader spectrum of clients. Most trustees neglect to mention the fact that just like bankruptcy consumer proposal is registered under the BIA (bankruptcy and insolvency act), and public record. Proposals are extremely detrimental to the consumers credit bureau, and can take between 3 to 8 years to begin the credit rebuilding process. After including fees, proposal amounts are similar to debt settlement with dramatically worse effect.
WHAT ABOUT SETTLING DEBTS?
Creditors don't settle debts over an extended amount of time, they'd sooner push you into proposal for maximum negative impact. The best thing to do is tap equity in a home, liquidate assets, borrow against vacation pay, RRSPs or family and friends. With a lump sum and depending on the consumers situation, debt settlement companies can sizably reduce the amount owing. It appears on the bureau with a zero balance, not public record. The only difference between paying in full and settling this way is the word "settlement made" in lieu of "paid" below that trade line, credit begins to repair in 30 days.