Do you know the difference between 'good debt' and 'bad debt?' Here's a generalization.
Bad debt is debt acquired buying something you should have bought for cash had you only had the cash. That's virtually every purchase on your credit cards, your car, the washer and dryer, and 'the toys': hot tub, boat, motorbike, satellite dish, computer, plasma TV, etc, etc. All this stuff, if bought on credit, is costing you a fortune in interest charges, while the stuff you bought is rapidly depreciating. So that's bad debt.
Now good debt is an RRSP loan (you get savings for retirement and a tax break), a student loan or business loan (because these are helping you improve your life), a mortgage to buy your house (a form of saving), borrowing money to invest like a GIC.

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Key Considerations When Choosing Debt Handling Services

Up until recently, individuals who have found themselves in debt have turned to Debt Consolidation, Credit Counselling, and/or Bankruptcy. There is now a new service called Debt Arbitration that assists those in debt to actually have a portion of their debt forgiven. Therefore, if you owe $10,000 on your MasterCard and your family member will lend you $3000.00 (or you have another source of funds i.e. RRSP's), you can have $7000.00 forgiven. The following graph illustrates some very key points of each industry. Debt Consolidation is not included as it is the least effective way of eliminating debt, unless it is following a successful settlement of all your debts.

Key Considerations	Credit Counselling	Bankruptcy Trustee or Proposal	Debt Arbitration
When will my debt be erased from the credit bureau?	3 years from date settled (min. of 6 years). Automatic R7.	Bankruptcy: 6 years after the discharge. Proposal: 3 years after the Proposal is satisfied (min. of 6 years).	6 years (remains at rating settled at i.e. R3, R4, R9) Usually, the least negative of all other services.
What about costs?	Credit counsellors hold back a portion of the payments you make for their fees.	Fees in almost all bankruptcies and in consumer proposals are set and regulated by the government.	Percentage of the amount the debt is reduced by, and only on successful settlements (for most companies)
Which is cheaper?	Generally adds to the debt and prolongs it over time.	A bankruptcy or a proposal is usually cheaper in up front cost, but can cause the loss of assets or garnished income.	Never adds to the debt!
Can income tax debt and other CRA debt be included and eventually written off?	No	Yes. Almost all debts can be written off. Trust funds such as source deductions and unremitted GST cannot.	Most companies deal with unsecured debt only, but can refer you to someone who settles CRA debt.
Once I agree to a debt repayment plan with a credit counselor, Debt Arbitrator or file for bankruptcy or a proposal, will my creditors, including CRA, be forced to stop all actions against me including trying to collect money; phoning me; garnisheeing my wages or repossessing my assets?	No.	Yes. By law, all actions must cease and garnishees are stopped or prevented once a proposal or bankruptcy is filed. Collection calls will stop once the collector knows you have filed a bankruptcy or a proposal.	Yes, all unsecured creditors that have settled must cease any further action. Most collection calls cease once an Arbitrator's services are retained due to legislation.

Key Considerations	Credit Counselling	Bankruptcy Trustee or Proposal	Debt Arbitration
Which will give me a better credit rating?	The creditors will be reported as a '7' on the Credit Bureau, and this rating stays on your history for 3 years after you've concluded the program.	In most circumstances a bankruptcy or proposal will deal with your debt quickly thus allowing you to start to rebuild your credit sooner.	You will have a low debt to income ratio. Generally, more monthly cash flow. Your credit report will show as "settled in full" or "settled balance zero." Allow you to start rebuilding your credit sooner.
Can I pay back less then I owe and have the rest of the debt erased?	Only in rare circumstances.	Yes.	Yes (Debt Arbitrators can offer less to your creditors because they are privately owned). The Arbitrator represents you, not your creditors or the government.
What training and education do credit counsellors, arbitrators and trustees in bankruptcy have?	There are no set standards.	Almost all trustees have both an accounting designation and a university degree. In addition, all must complete and pass a rigorous three-year bankruptcy and law course and be investigated by the RCMP before being granted a trustee licence. Ongoing professional development is mandatory.	There are no set standards, but most companies will have professional training (i.e. International Association of Professional Arbitrators) Ongoing professional development in required with most companies.
Are they regulated?	No	Yes, by the Federal Government. The government performs regular audits on each trustee office. Also stringent codes of ethics are in place by the Bankruptcy and Insolvency Act, the CAIRP and the accounting bodies.	No, but most companies are guided by a strong code of ethics. It is important to research the company that you would like to work for you.

Key Considerations	Credit Counselling	Bankruptcy Trustee or Proposal	Debt Arbitration
What kinds of debt repayment plans are offered?	Payment plans, where monthly payments are made which are distributed to the creditors.	Bankruptcy and two kinds of Proposal. (one of which can automatically bankrupt you if rejected by your creditors)	A single lump sum payment to each creditor (in a few cases, the lump sum payment may be split into two or three parts).
Is Government approved Credit Counselling offered?	In some cases.	Yes. Government tested and approved counsellors provide credit counselling in all bankruptcies and consumer proposals.	No. Arbitrators will provide referrals for any additional support.
What if I have a dispute?	There is no dispute mechanism in place.	You have the right to have your dispute mediated.	It depends on the company. Most will provide a mediation process.