Debt Management Plans Ontario

What is debt management plan?

A debt management plan is a service provided by member agencies of the Ontario Association of Credit Counsellors. They are non-profit agencies created to help individuals experiencing financial problems. Credit counsellors serve two primary functions.

First, they will meet with you and help you review your budget, and find ways to reduce expenses to bring your budget back into balance, and help you manage your money in the future. If learning new money management skills is not enough, they can also help you file a debt management plan.

In a debt management plan your credit counsellor will contact your creditors (the people you owe money to) and work out a repayment plan. Once the debt management plan is accepted by your creditors, you make the agreed upon payment to your credit counsellor each month, and they disburse the money to each of your creditors.

Debt management plans are best suited to persons with a limited number of creditors (5 or less) and under $15,000 in debts, although they can be used for larger debts. The advantages of a debt management plan are:

	Maximum period to repay is 5 years;
	Interest relief may be possible (in many cases all future interest is eliminated); and
	Once accepted, creditors stop calling

A debt management plan is not a legal procedure - it is a voluntary agreement between you and your creditors. As a result, a debt management plan does not need to include all of your creditors; in theory you could exclude a creditor if you wanted to.

However, a DMP is not it binding on your creditors. A debt management plan also does not have the ability to automatically stop a garnishment order - the creditor must agree to lift the garnishment.

Because a debt management plan is not binding on all creditors (unless each one accepts the plan), if one creditor does not accept the plan, the entire plan may fail. In that case a consumer proposal may be a better option. In a consumer proposal if a majority of the creditors based on dollar value accept the proposal, the proposal becomes binding on all creditors.

If you think a debt management plan would work for you, look under Credit Counseling in the Yellow pages or check moneyproblems.ca for an credit counsellor in your area.