Debt Consultants review a consumer’s debt and commonly design proposals (or bankruptcy) that the consumer can take to a Licensed Insolvency Trustee.   Because these firms are charging consumers for services that a Licensed Insolvency Trustee does for free, the Office of the Superintendent of Bankruptcy has issued this warning.

Over the last few years many measures have been taken to protect vulnerable consumers, seeking debt relief, from being taking advantage of by Debt Consultants, Credit Counsellors and Debt Relief Consultants.

Consumer protection laws have been enacted recently in BC, Ontario, and other provinces. Bankruptcy Trustees have had their name changed from Trustee in Bankruptcy to Licensed Insolvency Trustee to attempt to make it clear to consumers that a Licensed Insolvency Trustee (LIT) is the only professional who can file bankruptcies and consumer proposals.

The Canadian Association of Insolvency and Restructuring Professionals (CAIRP’s) December 2, 2015 press release included the following:

“Canadians need to know exactly where to turn when they can no longer handle their debt payments. The Licensed Insolvency Trustee is the only professional licensed by the federal government to deal with debt restructuring,” said David Wood, Chair of CAIRP.

These protective measures do not affect debt consultants that exist only to attract debtors in order to charge them a fee and then refer them to a Licensed Insolvency Trustee.  These firms are charging vulnerable consumers for services that a Licensed Insolvency Trustee does for free.

This is a problem affecting all parts of Canada. 

We have appended some Debt Consultants’ websites, whose main business model is to attract debtors, charge them a fee and then refer them to a Licensed Insolvency Trustee.

I am aware of at least one of the debt consultants that uses its referral clout to have trustees attend at their offices to sign in debtors to a bankruptcy or a consumer proposal.

One trustee firm, I know of, refused to attend at their offices to sign in debtors to bankruptcy or a consumer proposal, because that firm felt it impugned the integrity of the insolvency process and sent the debtor a message that the trustee worked for debt consultants, and therefore was not independent and even handed.  This trustee firm paid a steep price for their ethical stance since that company stopped sending them referrals.

Author’s Note:   Another problem with trustees signing in people at the offices of the debt consultants’ is that much of the paper work is completed by the debt consultants.   This might lead to the trustee being a glorified rubber stamp or becoming complacent.  Perhaps the trustee will not do as thorough a job of vetting the debtor and advising him of various other options, than would be the case if all the work and face to face meetings were at the trustee’s office.  

Perhaps the trustee should advise the debtor, that because he is judgement proof, he does not have to file a bankruptcy to have protection from his creditors.   Perhaps the debtor did not include all his debts, including anything owing to the debt consultants.   Perhaps the debtor did not include all his assets or did not divulge assets disposed of recently.   Perhaps the debtor has financial and other issues, where the trustee should refer him to an insolvency lawyer for independent advice.   Perhaps the “seize or  sue” issue comes into play and the debtor should wait awhile before filing. 

In BC and Alberta there are “seize or sue” laws regarding vehicles.   This means a creditor can seize or sue to collect on the loan, but cannot do both.   I have advised some debtors, who wanted to file bankruptcy, not to file only because of a large vehicle loan debt but to wait awhile and if the creditor seized the vehicle that would erase all vehicle debt and he would not have to file.

What some others, LITs and the OSB are saying about debt consultants:

Colleen Craig, LIT, a trustee in Victoria, brought the actions of these firms to the attention of the public and the OSB in April, 2014:

  1. An article in Focus Magazine.
    Focus Magazine’s Author’s Note April 8, 2016:  My original blog (March 8th 2016) and Focus Magazine’s original article stated the name of the local Debt Consulting Company used by the debtors quoted in the article. After a legal complaint was made from the Debt Consultant’s lawyers threatening legal action, Focus Magazine amended their article to remove the name of the Debt Consulting Company. I also received a letter threatening legal action from the same lawyer from Vancouver.   After considering my options and the fact that I am a sole practitioner here in Victoria and only have myself to rely upon, and realizing that the Debt Consulting company states that they have many offices across Canada, (i.e. large national firm, and therefor big financial resources) I felt it financially prudent to remove the name of the Debt Consulting Company from my blog as well.  Removing their name does not in any way admit to any wrongdoing on my part or that of Focus Magazine.
  2. “Debt Consultants Taking Advantage of Vulnerable Consumers” (As published on LinkedIn, complete with all the comments etc)
  3. An article on the website of Trustee, Colleen Craig, LIT Colleen debates with a “Credit Counselling Professional”
  4. An article on the website of Trustee, Colleen Craig, LIT Colleen writes regarding serious misinformation contained in an article about Debt Counsellors.
  5. An article on the website of Trustee, Coleen Craig, LIT Another warning from Colleen about Debt Counsellors.

Doug Hoyes, LIT has this to say:

The OSB has issued this warning on Debt Consultants:

What should the Office of the Superintendent of Bankruptcy (OSB) and CAIRP do?

I suggest that the OSB look into the feasibility of laying charges against such  firms, in accordance with Section 7 of Directive 33 or Section 202. (1) of the BIA:


  1. Any person using the designation “Licensed Insolvency Trustee” (LIT) who is not a licensed trustee may be found guilty of an offense under paragraph 202(1)(a) of the BIA, which is punishable on summary conviction and liable to a fine or imprisonment or both.
  2. 202. (1) of the BIA, which reads, under, the caption Other Offences:A person who (a) not being a licensed trustee, does any act as, or represents himself to be, a licensed trustee………is guilty of an offence punishable on summary conviction and is liable to a fine not exceeding five thousand dollars, or to imprisonment for a term not exceeding one year, or to both.

If the above wording is not specific enough to lay charges I suggest the wording be expanded or a directive written to address this problem.

I suggest that the OSB and CAIRP:

  1. Forbid trustees from signing in debtors to bankruptcy or consumer proposals at offices of people who refer files to them; and
  2. Forbid trustees from signing in debtors to bankruptcy or consumer proposals in the company of third parties, from whom the file was referred.

Yours truly,

Earl Sands, LIT

debt consultants


  • This video says that 35% of consumer proposals filed with a trustee fail, while 4 Pillar’s consumer proposals have a 97% completion rate.

    • More misinformation to take advantage of vulnerable consumers!

      The 35% statistic is from 2004 when consumer proposals were just getting started. It was also before the automatic revival provisions set out in 66.31 (6) and (7) of the BIA. The automatic revival of a consumer proposal, enabled a deemed annulment (a failed consumer proposal) to be revived (for the debtor to be given a second chance to keep the consumer proposal in effect).

      The consumer proposal success rate is very much higher now. A Licensed Insolvency Trustee confirmed that less than 2% (1.89%) of the consumer proposals filed through his offices in 2015 and 2016 failed. That’s a +98% success rate!




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