Debt Consultants or Licensed Insolvency Trustees

Decoding the Debt Relief World: Debt Consultants or Licensed Insolvency Trustees

In the complex realm of debt relief, two figures stand out prominently – Debt Consultants and Licensed Insolvency Trustees. These professionals offer a pathway to financial freedom, but their roles, responsibilities, and implications are often misunderstood. This article sheds light on these two entities, helping you make an informed decision.

Who are Debt Consultants and Licensed Insolvency Trustees?

Debt Consultants are for-profit organizations that claim to help with debt settlement. They advertise services like ‘settling your debts for a fraction of the amount owed’. However, their background, qualifications, and regulatory oversight often remain ambiguous.

On the other hand, Licensed Insolvency Trustees (LITs) are licensed by the federal government. They function as officers of the court, ensuring the bankruptcy laws are implemented correctly.

LIT vs Debt Consultants

Role and Authority

Licensed Insolvency Trustees

LITs have the legal authority to administer a consumer proposal – a legal debt settlement process outlined in the Bankruptcy and Insolvency Act. This can only be administered by a Licensed Insolvency Trustee. They can enforce a settlement even if not all creditors agree, as long as the majority does.

Debt Consultants

In contrast, Debt Consultants merely attempt to negotiate with your creditors. They lack the legal authority to enforce a settlement, making their effectiveness uncertain.

The Misleading Labyrinth: Advertising and Websites

Many debt consultants advertise services like consumer proposals and bankruptcies, which can only be undertaken by LITs. Their websites often fail to identify them as non-LITs, leading to confusion.

For instance, a website like credit720.ca, advertises bankruptcy and consumer proposals but nowhere does it mention that they are not an LIT.

The Red Flags

If a firm offers services such as consumer proposals and bankruptcies but fails to identify as a Licensed Insolvency Trustee, that’s a red flag.

Moreover, if you’re directed to a debt calculator providing a cost comparison of different debt relief options, including a consumer proposal, but no clear identification of the company as an LIT, caution is warranted.

The Mystery Unveiled: A Case Study

To understand the operations of such companies, let’s consider an interaction with a representative from credit720.ca.

User: What services do you offer?
Credit 720: We offer credit counseling, debt management, consumer proposal, and bankruptcy.

User: Are you a bankruptcy trustee?
Credit 720: We are a credit counseling firm. We have trustees working with us.

User: Will I see a credit counsellor or trustee?
Credit 720: Initially you’ll be seeing a credit counselor and if required you may see a trustee later on in the process.

The conversation continues, revealing that the trustees are independent license holders working with the company, and the fees are decided based on the complexity of your file.

The Deceptive Practices

Such companies, while advertising the services of a Licensed Insolvency Trustee, are vague about who will be handling your case and how the fees will be determined. They offer services that can only be administered by a Licensed Insolvency Trustee, yet they are not LITs themselves. This can lead to unnecessary, and often high, consulting fees for the consumer.

A Word of Caution

Before entering into any agreement, it is crucial to investigate the company and the individual you are dealing with. Ensure that you are only making payments to a Licensed Insolvency Trustee, not an unlicensed debt consultant.

The Bottom Line

The world of debt relief is complex, and the choice between Debt Consultants and Licensed Insolvency Trustees can be confusing. However, with the right knowledge and cautious approach, you can navigate these waters safely. Always remember, the goal is financial freedom, and the right professional can make the journey smoother.

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