A Credit Counsellor or Licensed Insolvency Trustee: Who Is The Best Debt Relief Provider?
When it comes to managing debt, understanding the difference between a Credit Counsellor and a Licensed Insolvency Trustee (LIT) is essential. Each professional has a unique role and offers distinct services to help individuals navigate their financial troubles. This comprehensive guide will delve into the key differences between the two, their roles, and how they handle debt.
Understanding Licensed Insolvency Trustees (LITs)
A Licensed Insolvency Trustee, commonly known as an LIT, is a professional certified by the Office of the Superintendent of Bankruptcy (OSB) to administer proposals and bankruptcies.
Role of LITs
These professionals are skilled in providing financial advice and services to individuals and businesses struggling with debt. They are strictly regulated by governing bodies, like the OSB and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). This regulation ensures that LITs are qualified and act in their clients’ best interests.
Regulation and Pricing
Unlike Debt Consultants, LITs operate under a structured business model, and their fees are federally regulated. This means they are prohibited from overcharging clients. If a client is dissatisfied with a Trustee’s performance, there is a formal complaint mechanism in place.
Services Offered
Ordinarily, LITs are the only professionals authorized to administer insolvency procedures, such as proposals or bankruptcies, which can help individuals overcome debt.
Understanding Debt Consultants
Unlike LITs, Debt Consultants are unregulated advisors. They do not need to meet stringent legislative requirements or have any formal training or relevant background to provide their services.
Role of Debt Consultants
These consultants offer advice to clients on setting money aside in a separate bank account until they can pay off their creditors. While this method has some advantages, it does not offer any protection from collection actions and wage garnishment until the required amount is saved.
Regulation and Pricing
Since Debt Consultants are unregulated, they have few restrictions on what they can charge for their services. They are not allowed to file consumer proposals or bankruptcies and cannot serve as bankruptcy trustees in insolvency cases.
Differences in Approach to Managing Your Debt
The approach to handling debt varies between Licensed Insolvency Trustees and Debt Consultants.
Debt Consultants’ Approach
Most Debt Consultants advise clients to save money in a separate account until they can pay off their creditors. However, this approach does not provide protection from collection actions and wage garnishments.
LITs’ Approach
On the other hand, LITs have various tools at their disposal. They can help you find a suitable debt management solution and are ethically obligated to present the best option for your needs. They also explain the debt management process before you agree to it and guide you through each step.
Credit Counsellors: A Closer Look
Credit Counsellors offer financial advice and assistance, much like Debt Consultants and LITs. However, they are unable to file a bankruptcy or consumer proposal for you. There are two types of Credit Counsellors: Non-profit and For-profit.
Non-profit Credit Counsellors
Non-profit Credit Counsellors work with you at a low cost or sometimes for free. They can help you create a budget and make plans to repay your debt.
For-profit Credit Counsellors
For-profit Credit Counsellors and debt settlement businesses, on the other hand, charge you for their services. They also offer financial advice and assistance, much like Non-profit Credit Counsellors.
Regulation of Credit Counsellors
The government of Ontario sets rules that all counsellors and debt settlement businesses must follow. Licensed Insolvency Trustees follow a different set of rules.
Conclusion: Choosing between a Credit Counsellor and a Licensed Insolvency Trustee
When it comes to managing debt, choosing between a Credit Counsellor and a Licensed Insolvency Trustee depends on your specific needs. The main difference between the two is that LITs can administer insolvency procedures, such as proposals or bankruptcies, while Credit Counsellors cannot.
Consider your financial situation, the amount of debt you owe, and the services you require before choosing a professional. It’s essential to consult with a professional who can provide you with the best advice and services to overcome your financial issues.
