Debt Consolidation Loans — Medicine Hat Resources You Need to Know
With the exception of some declarations of personal bankruptcy, all available solutions to debt problems involve replacing multiple monthly payments made directly to your unsecured creditors with a reduced single payment. These solutions are referred to as debt consolidation and generally take two forms – debt consolidation loans or debt consolidation repayment plans. In Medicine Hat, resources are readily available to help you sort through different means of dealing with severe debt burdens.
Debt Consolidation Loans
With this approach, you borrow enough money from a single lender to pay off all your unsecured debt, leaving you with a reduced single monthly payment. If you owe 5 creditors a total of $15,000, you borrow money from your bank or another lending institution to pay back the $15k. With good credit and something to put up as collateral, like the equity in your home or an expensive car, your loan will generally be at a much lower interest rate. In rare cases it is possible to get an unsecured loan but typically the interest rate would be much higher.
The first Medicine Hat resource most people turn to for help here is their own bank. However, there are both credit counselors and for-profit debt solution companies that act as brokers and can help you arrange a debt consolidation loan.
Debt Consolidation Repayment Plans
Debt Consolidation repayment plans can be grouped into two categories:
1. Those in which you pay back all you owe over an extended period of time.
2. Those in which you pay back less than you owe over an extended period of time.
Debt management plans let you repay all you owe by consolidating payments over an extended period at lower interest. They are available to Medicine Hat residents through credit counseling agencies and some debt solution companies. Debt solution companies are for profit businesses while most credit counseling agencies are non-profit. In a management plan, the debt professional determines a monthly payment you can afford to make for an extended period and then makes arrangements with your creditors to accept smaller payments over that longer period directly from them instead of from you.
Most debt management plans do not legally protect debtors from collection activity. However, residents of Alberta and Saskatchewan have an additional option – an orderly payment of debts (OPD). This alternative is only available through an approved non-profit credit counseling agency and involves petitioning the courts for a consolidation order that allows the debtor 4 years to repay all that is owed. The order stops any collection activity already underway against the debtor and prevents any future action as long as the monthly payments continue to be made.
For debtors who have sufficient income to repay some of what they owe, there are debt settlement repayment plans. There is a time limit to management plans, which make it impossible for debtors with large amounts of total debt to pay it all back. So the professional debt solution provider determines an affordable monthly payment you can make over 5 years and proposes to your creditors you repay that reduced amount. Creditors are willing to accept these arrangements if they can be convinced they will net more from you with the repayment than they can from legal collection activities that might throw you into bankruptcy.
In Medicine Hat, there are two places you can go for debt settlement repayment plans. One is to the kind of debt solution company that advertises on television all the time. The other is to a licensed bankruptcy trustee. Although the basics of the plan are similar, the difference is that the plan offered by a trustee – called a consumer proposal — comes with full legal protection.
Finally, you need to know not all bankruptcy filings allow debtors to completely eliminate monthly debt repayments. While debt consolidation is not a part of bankruptcy in any way, higher income filers are expected to contribute some of their income, which is considered surplus towards creditor repayment during bankruptcy.
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