Debt settlement programs have helped many Canadians like you get out of debt and save money on interest fees and even on their principal balance. While every institution is different, this is the basic process involved for those who sign up for a debt settlement program.
Your first step is to speak to a representative of the debt settlement company.
You might be convinced that debt settlement is the best option for you, but sometimes, after looking at your specific situation, you’ll find you’re better suited for another debt relief option such as debt consolidation, credit counselling, the consumer proposal or even bankruptcy.
You should know before you contact a debt relief provider that debt settlement is usually best for medium-sized debts, and generally only those with debts larger than $10,000 enter into debt settlement. Those who owe less and can make some payments often do better with consumer credit counselling or a low-interest debt consolidation loan.
If debt settlement is the best choice for you, you will enroll in a program that will begin working on your behalf with your creditors. The goal is to actually reduce the amount of principal that you owe to your creditors and not just your interest rates. Working with creditors day in and day out, your representative knows the best ways to get them to look at your situation more favorably. Because of this expertise, you will usually get better debt reduction offers from your creditors than you would when trying to negotiate a settlement yourself. Depending on your credit history and financial status, you may be able to reduce the amount of principal that you owe from anywhere between 20 and 80 percent.
Note that the types of debt you can settle are unsecured debts such as credit cards, consumer loans and sometimes even car loans. Secured debt like a mortgage does not qualify as part of a debt settlement program.
The Payment Process
The payment process actually occurs at the same time as your rep is negotiating with your creditors. Once you have enrolled in a program, you will start making payments into a special purpose account. Your creditors will be paid from this account one at a time as you accumulate enough money to pay the agreed-upon settlement amount for each creditor. You will see your debts eliminated one by one as you pay them off, and at the end of the process, you will be debt-free!
After the Last Creditor Is Paid Off
After your final creditor is paid off and you are debt free, you may receive a graduation package that has copies of your settlement agreements as well as some information on how you can start rebuilding your finances. The money that you no longer have to use to pay your debts should now be saved and invested.
Find Out More
It’s time to speak to a professional to understand your options. Fill out the Canadian debt relief form and find out which debt relief option is best for your situation.