What are voluntary repayment programs?

Voluntary repayment programs and services are implemented in Canada. One typical example is voluntary debt repayment. This debt repayment program of the debt can be defined as the scheme in which the debtor repays the debt amount without taking up or sticking to any kind of obligations to be met by the debtor. These programs are methods in bailing out debtors and their families from liabilities and financial crises.
Credit Counselling Canada disclosed a consumer proposal to creditors, which is a legally binding procedure administered for the courts through a licensed trustee in bankruptcy. Both you and your creditors are bound to payment arrangements made through the trustee. Usually the amount repaid is less than the full amount. You must be in a financial position to meet these arrangements. A debt repayment program is an informal voluntary arrangement which allows you to pay your debts in full.

What are the Merits of Voluntary Repayment Programs?

Just like any debt settlement program, voluntary repayment programs have their own positive benefits and downsides. The major benefit is that unsecured debts can be terminated within a maximum of five years. There are agencies that are meant to help Canadians and offer proposals to help them pay their debts through a non-profit basis. A credit counselling agency will help you negotiate with creditors and consolidate your debt into manageable payments and avoid bankruptcy.

What are the Benefits of Using Credit Counselling Agencies?

These agencies make available Debt Management Programs wherein the agency bargains with creditors to work out a repayment plan. Such plans may reduce the interest and monthly payments paid by the client. Some agencies may advertise that they can reduce your monthly payment by as much as 50%. A reduction of 10% to 25% is more common. The agency will contact these creditors on your behalf to obtain their acceptance of your DMP – which they may choose to accept or decline. Before entering into a DMP, most agencies will require you to sign a contract, which states you will make regular payments to their agency. The agency then distributes your payments to your creditors.
The bankruptcy-in-canada.com explains that
A DMP through a credit counselling agency is ideal where:
• You are unable to get a debt consolidation loan but still want to repay your debts
• You have a good income and can afford to make payments of at least 75% of your current minimum monthly payment
• You need assistance in negotiating with your creditors
A DMP may not be the right solution for you if you are unable to repay all of your debts in full within five years, even with interest relief. If you cannot afford to pay all of your debts in full, but still want to negotiate a payment arrangement with your creditors, a consumer proposal may be a solution than credit counselling. Under a consumer proposal it is possible to negotiate a settlement of less than 100 cents on the dollar.
For example, if you have $50,000 in debts, a typical DMP with interest relief would require you to pay $1,000 per month over 50 months. If you can only afford $500 per month, a consumer proposal may be a better option. If you can't even afford that, personal bankruptcy may be the only solution.

How does the Canada Customs and Revenue Agency Help?

The Canada Customs and Revenue Agency (CCRA) plans for voluntary programs for the payment of taxes by people under the Customs Act. The Voluntary Disclosure Programs (VDP), work under the welfare initiatives that are taken up by the Canada Customs and Revenue Agency. A debtor needs to be qualified to receive debt consolidation help of any kind from the VDP acting under the CCRA. One of the conditions to qualify include that the debtor must pay the taxes along with the interest amounts. Customers seeking assistance through voluntary repayment programs may belong to different categories. The merits of client will be evaluated by the individually. The disclosure by a debtor will be considered valid only if it is genuinely proved that the act has been completely voluntary and has not been because of any kind of enforcement. It will be declared valid only if the chain of procedures that the debtor goes through is complete and verified.

Monitoring your Progress

Debtors need to monitor their progress carefully to be able to maximize the benefits of voluntary repayment programs. They should which plan will work for them and find our if the credit counselling agency will be able to help them resolving their debt concerns.

References

creditcounsellingcanada.ca
bankruptcy-in-canada.com