Frequently Asked Questions
We, at Debt Mitigation Canada welcome everyone who wants assistance with debt relief.
What types of debts can be consolidated without a loan, i.e. using a Consumer Proposal?
The loan consolidation under a debt consolidation program or consumer proposal depends on what creditors agree to. You can consolidate medical bills, credit card debt, unsecured lines of credit, non-government student loans and unsecured personal loans. Any secured loans (mortgage, auto loan etc), government student loans (like Alberta Student Aid or Ontario Student Assistance Program), and any dues owed to the CRA cannot be included in a Consumer Proposal.
How is the amount of debt settlement determined?
Depending on various factors like how collectable you look on paper (based on management of other debts), how long you’ve had the account and how delinquent your account is, the amount may be decided.
While pursuing debt settlement, can I be sued by my creditors?
Yes. The creditors are well within their rights to file a lawsuit if you’re not paying back your debt. In fact, this is one of the biggest concerns you must address before choosing debt settlement as an option.
Does a debt management plan hurt the credit score?
As your credit accounts are closed, your credit score will dip in the beginning. Regular repayment can help improve the same over time. In case the negotiations are rejected by your creditors, your interest and repayment amount shall also accumulate.
It is necessary to include all unsecured loans in the debt management plan?
Yes, it is necessary to include all unsecured loans on your debt management plan. This implies the closure of all revolving credit accounts, for further use.
Can I use my credit card while enrolled in a DMP?
Any credit card included in the DMP will be rendered close until the debt is settled. Creditors usually offer a lower interest rate with the condition that you close the card.
Who is eligible for credit counselling?
Any individual seeking help to manage money and credit or reducing as well as eliminating debts is eligible for credit counselling.
How is credit counselling different from an informal debt settlement?
In the case of an informal debt settlement, you call your creditors yourself to see if they are in a position to offer any options for debt relief. On the other hand, when you work with a qualified credit counsellor, they will contact your creditors to negotiate your repayment terms. Additionally, your credit counsellors also educate and counsel you about your financial options.
How do I increase the acceptance rate of a Consumer Proposal?
There are three rules of thumb to increase the acceptance rate of a Consumer Proposal - your payments must be affordable, it must meet the minimum expectation of creditors and your offer must be higher than what creditors will receive in bankruptcy.
Can I leave a creditor out of my proposal?
No. It is mandatory to include all unsecured creditors in your consumer proposal.
What is the maximum term of a Consumer Proposal?
Payments in a consumer proposal can be spread over a maximum period of 60 months. If you can afford higher repayments per month, you may shorten the duration.
Does bankruptcy wipe out all my debts?
No, bankruptcy can help you get rid of some but not all debts. For instance, it does not discharge child support, alimony and unliquidated debts. Unsecured debt from credit cards and hospital bills may be forgiven in most cases.
What should I do if a creditor demands payment after I file my case?
Most efforts by creditors to collect pre-petition debt or to repossess your property without the court’s permission are violations of the automatic stay. The court may take action against the creditor who violates the stay order and the creditor shall be liable to the debtor for the harm caused.
Do I need to list all creditors on the bankruptcy schedule?
Yes, all your debts and creditors must be listed.