How a debt management plan works in Canada

• The counsellor combines your debts into one monthly payment.
• You pay the agency, which sends the money to your creditors.
• Creditors may agree to lower interest or fees, or give more time, but some may decline.
• Collection agencies can still contact you. A counsellor can ask them to stop but cannot force them.

• List all your debts.
• Pay on time.
• Avoid new credit.
• Missed payments can cancel the plan.

Secured debts such as mortgages and car loans are usually not covered.

The FCAC says to compare the agency's fees (setup, monthly, application, membership or per creditor) against the interest you would save. Fees may still apply even if creditors refuse to negotiate. Reputable agencies do not charge for the first meeting.

Be careful of any claim to erase debt quickly or fix your credit fast.

Check that the agency belongs to a recognized association and has no serious unresolved complaints. The FCAC notes counsellors are not legally required to have specialized training, though many do. Keep a copy of the agreement and ask for regular status reports and receipts.

• How a plan shows on your credit report. The FCAC page we read does not say.
• Typical fee amounts. The page does not give any.

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