In this YouTube video Mark Silverthorn, Founder of Comprehensive Debt Solutions, explains why it is expensive for a consumer to eliminate debt by way of credit counselling.  Furthermore, he states that it is three times more expensive for a consumer to eliminate consumer debt using credit counselling compared with a consumer proposal.

Credit counselling is an incredibly expensive method for eliminating unsecured consumer debt

Advice for those wanting  to enroll in a DMP  with a credit counselling agency


If you have made the decision to enroll in a Debt Management Plan with a credit counselling agency then before you make your first payment to the agency you should insist on receiving a signed letter on the agency's letterhead confirming the details with respect to the interest relief that you are entitled to under your Debt Management Plan.


You need to know whether or not the creditors included in your Debt Management Plan will be providing you with interest relief, and if so, how much?  Is a creditor going to provide you with 100 percent interest relief or only partial interest relief, and if only partial interest relief, how much relief?  Once you obtain information regarding what interest relief, if any, your creditors are prepared to offer you, then it is possible that you might decide that you do not want to do a Debt Management Plan at this time or--with this credit counselling agency at this time.

The vast majority of credit counselling agencies in Canada are non-profit credit counselling agencies and they receive the majority of their revenues from creditors--something referred to in the industry as voluntary donations from creditors.


The fact that non-profit credit counselling agencies not only receive the majority of their revenues from creditors but also that they do not receive a penny in revenues unless a consumer enrolls in a Debt Management Plan puts a non-profit credit counselling agency in a terrible conflict of interest when it comes to providing consumes with unbiased and independent advice.


If you owe more than $10,000 in unsecured consumer debt, and you do not fall within two of the special circumstances referred to above then a consumer proposal will be a much cheaper method--three times less expensive--of eliminating your debt.

This section is divided into the following parts:



Credit counselling in 300 words or less


Credit counselling is only available to eliminate unsecured consumer debt


Credit counselling is an incredibly expensive method to eliminate unsecured consumer debt


Advice for anyone who wants to enroll in a Debt Management Plan with a credit counslling agency

Credit counselling is a very expensive debt relief option.  It is, for example, three times more expensive than a consumer proposal.


A consumer should not consider resolving their debts by way of credit counselling if their debts include monies owing to firms that do not offer interest relief to persons enrolled in  a Debt Management Plan--some finance companies and payday loan companies.


There are two very limited circumcstances where credit counselling might be an ideal debt relief option:


  • Where you want to file for personal bankruptcy but you have yet to have ceased attending school for seven years then you might want to enroll in a Debt Management Plan and subsequenty drop out of it when you have reached the seven year mark at which time you can file for personal bankruptcy (and discharge your student loans)
  • where you curently cannot make the minimum monthly payments on your unsecured consumer debt and your household income is going to increase dramatically sometime in the next 12 to 36 months

Those consumers who enroll in a Debt Management Plan with a credit counselling agency will  repay a minimum of one hundred percent of all  their current unsecured consumer debt--with no exceptions--by making monthly installment payments over a period of time, not to exceed 48 months.

Credit counselling in 300 words or less

Depending upon which types of debts that you have you might not be albe to eliminate all your debt by enolling in a Debt Management Plan with a credit counselling agency.


There are essentially four different types of debt.


Secured debt:   A secured debt is one where the creditor has some security in the event that you do not pay monies owing to your creditor.  The two most common examples of secured debt are a lien on a car in connection with the purchase or lease of an automobile and the mortgage on a piece of real property;  house, townhouse, condominium, cottage, rental property, or farm.


Unsecured consumer debt:  Any debt that is not secured debt falls into the category of unsecured debt.  Some, but not all, unsecured debt is debt that is owed to a private sector lender or private sector provider of goods or services.  This debt is referred to as unsecured consumer debt.


Monies owing to the government:  Some debt, regardless of whethe or not it is secured or unsecured debt, is owed to the government.


Non-dischargeable debt:   There are certain types of debts which are not discharged or forgiven in the event of a personal bankruptcy or consumer proposal.  This non-dischargeable debt includes the following:

Credit counselling is only available to eliminate unsecured consumer debt

  • monies owing pursuant to child support or spousal support obligations


  • fines owing to the government


  • civil claims arising from fraud
  • creditors who agree to participate in your Debt Management Plan will stop making collection calls
  • You will be able to lower your current monthly payments to unsecured consumer creditors because you will have the opportunity to repay what you owe over an extended period of time--but typically not longer than 48 months
  • in some, but not all, instances, when you arrange for credit counselling, your creditor might agree to provide you with some type of interest relief with respect to monies you owe duirng the life of your Debt Management Plan

There are a few reasons why a person might be interested in eliminating their unsecured consumer debt by enrolling in a Debt Management Plan with a credit counslling agency.  These include the following:

If you visit a website for a credit counselling agency or look at their promotional materials one of the issues that never appears to be mentioned is the actual cost of eliminating one dollar of your outstanding unsecured consumer debt using credit counselling.  And there is a good reason why this information does not appear on their websites.


Eliminating your unsecured consumer debt by enrolling in a Debt

Management Plan with a credit counselling  agency is an incredibly expensive method for eliminating your debt.  Eliminating one dollar of your unsecured consumer debt by way of credit counselling  will cost anywhere between $1.05 and $1.30.


Compare this cost with that of a consumer proposal, arranged thorugh a bankruptcy trustee, in which a consumer should  be able to eliminate their debt at approximately 35 cents on the dollar.  Eliminating your debt by way of credit counselling is three times more expensive than eliminating your debt using a consumer proposal.


There are three distinct costs associated with enrolling in a Debt Management Plan with a credit counselling agency.


1.        Payment of 100 per cent of your outstanding balance  


When you enroll in a Debt Management Plan with a credit counselling agency then you will repay 100 percent of your outstanding balance.


2.        Fees to be paid to the Debt Management Plan service  

           provider  


Typically, a consumer will pay a fee to the entity providing the Debt Managment Plan--usuaally a credit counselling agency.  A credit counselling agency will typically charge fees to the consumer enrolling in a Debt Managmenet Plan that will typically add an additional ten percent to the total cost of eliminating your debt using credit counselling.


3.        You might have to pay some of the interest on your

           outstanding balance during your DMP


Dedending upon a number of factors, when you enroll in a Debt Management Plan with a credit counselling agency you might have to pay some interest on your outstanding balance on the debts included in your Debt Management Plan.


There are essentially two different categories of credit counselling providers in Canada--those with non-profit status and those which do not have non-profit status--commonly referred to as for-profit credit counselling agencies.


Creditors in Canada--particularly the major banks and credit card companies--typically offer some type of interest relief to consumers who ennroll with a Debt Management Plan with a non-profit credit counselling agency.


If you enroll in a Debt Management Plan with a non-profit credit counselling agency they cannot guarantee you that you will not have to pay any interest on your oustanding balance during your Debt Management Plan.   Non-profit credit counselling agencies  advise consumers that they will attempt to "work with" your creditors in order to obtain interest relief.  In fact, in Canada some creditors--including some finance companies and payday loan companies--refuse to grant any type of interest relief to consumers enrolling in Debt Management Plans.


Creditors are more reluctant to offer interest relief to consumers enrolling in Debt Management Plans with for-profit credit counselling agencies.  Some creditors refuse to provide any interest relief and some creditors must provide interest relief which is not as generous as that offered to consumers enrolling in a Debt Management Plan with a non-profit credit counselling agency.


Credit counselling is one of a number of debt resolution options that might be available to a consumer depending upon their circumstances.


Credit counselling might be an option for a consumer to eliminate their unsecured consumer debt.  It is not available to eliminate secured debt, monies owing to the government or certain other types of debt including child support or spousal support obligations. 


If you choose to sign a contract called a Debt Management Plan witha a credit counselling agency there is no guarantee that all of your creditors will agree to participate.  Some creditors--including smaller creditors, some finance companies, and payday loan companies refuse to participate in credit counselling.  Furthermore, a bank or credit card company, which typically participates in credit counselling might refuse to do so if it feels that you have sufficient assets, such as equity in your home to deal with your debt situation.

What Every Canadian Should Know About Credit Counselling