“Failure is an opportunity to start again, only this time more wisely.” – Henry Ford
When debt levels becomes overwhelming it can feel as though you’ve run out of options. If you cannot qualify for a consolidation loan or find another, lower interest, way to pay off your debts then often the only escape routes are bankruptcy or a consumer proposal. For residents of Alberta, Saskatchewan, Nova Scotia and PEI though, there is an alternative program available to help people get out of debt. The Orderly Payment of Debts (OPD) is a government program that enables people to pay off their debts at a fixed 5% interest rate over a period of up to 5 years.
Where is the OPD available?
The OPD program is available to residents of Alberta, Saskatchewan, Nova Scotia and PEI. It is managed by credit counselling agencies such as Money Mentors (in Alberta) and Credit Counselling Services of Atlantic Canada (NS and PEI) and is intended to offer a way for debtors to pay off their debts and learn better money management skills along the way.
How Does the OPD Work?
Unlike bankruptcy or a consumer proposal, people entering the OPD program aren’t offering their creditors a settlement option where a portion of their debt is written off. With the OPD, debts are paid in full but the creditors agree to accept a lower rate of interest (5%) and a fixed payment schedule. Any unsecured debts (including tax debt) can be included in the OPD. The program is administered through the court system and, once the terms of the OPD have been agreed, creditors are no longer able to take legal action against a debtor or harass them by phone or mail to settle the debt provided that the debtor keeps up the agreed payment schedule.
After meeting with a credit counsellor, the agency will contact creditors on your behalf to communicate the terms of the OPD and give them an opportunity to respond. The program allows all your unsecured debts to be consolidated and paid off in a single monthly payment. The amount you pay each month is based on your individual circumstances and then the agency will divide that payment among the creditors with the largest portion going to the largest creditor and the smallest portion going to the smallest creditor. People entering the OPD program are allowed to keep their assets (house, car etc.) and they are free to pay off the debt earlier if they choose to without penalty.
Successful completion of the OPD also involves a financial education component which can be completed in live seminars or online at any time during the program.
Is There a Cost to use the OPD?
Depending on where you live and the number of debts involved, there may be a cost involved. The OPD programs are administered by not-for-profit agencies that charge a small fee each month to offset the cost of administering the programs but there are no penalties for paying off debts early.
How Does the OPD affect my Credit Score?
Once you are enrolled in the OPD program it will show on your credit report for as long as you are making payments. While you are making payments under the OPD, you are not allowed to apply for new credit. Once the OPD is paid in full and discharged, it will appear on your credit report for three years from the discharge date but you will be able to apply for credit and begin the process of rebuilding your credit score.
How Do I Apply for the OPD?
Residents of Alberta, Saskatchewan, Nova Scotia and PEI can contact a local credit counselling service and make an appointment with a credit counsellor to discuss their situation and determine whether the OPD is the best solution for them. The counsellor will walk you through the program, figure out a reasonable payment schedule and submit the required paperwork. They will also provide ongoing support and monitoring while you are in the program and an exit interview when you’re complete.
For those struggling with debt and dealing with constant phone calls from debt collection agencies, the OPD is a valuable tool that allows you to clear debt at a steady pace and a reasonable interest rate. If you are having a hard time managing your unsecured debts and you live in one of the provinces where the OPD is available, it might be worth considering.