How to Spot Canadian Debt Relief Scams

Avoiding Debt Relief Scams

When it comes to finding a solution for mounting debts, desperation can sometimes lead you down the wrong path. In Canada, a plethora of organizations claim to offer debt relief services, but not all are trustworthy. This article is designed to guide you on how to spot Canadian debt relief scams and ensure you make informed decisions for your financial well-being.

Identifying Red Flags

Upfront Exorbitant Fees

Legitimate organizations, including non-profit ones, charge fees for their services. However, if a company demands a hefty fee upfront before providing any service or fails to provide a guarantee for their fee, you should consider it a warning sign of a potential scam.

“Be wary of organizations that prioritize their fees over your debt.”

Unrealistic Promises

Promises such as erasing bad credit marks, halving your monthly payments, or reducing interest rates on all your credit cards may sound appealing, but they are often too good to be true. No credit counselling company can make such guarantees. If they refuse to put these promises in writing, it’s time to reconsider your options.

Dealing with CRA Debt

The Canadian Revenue Agency (CRA) rarely agrees to informal payment plans proposed by credit counselling or debt relief companies. If a company tells you they can get rid of your CRA debt, it’s likely they can’t solve your entire problem.

Stopping Creditor Calls

Creditors are within their rights to contact you to collect money, as long as they’re not breaking the law by harassing you. If a company promises to stop such calls, proceed with caution. Only Licensed Insolvency Trustees (LIT) can legally force your creditors to stop calling through a Stay of Proceedings.

Halting Garnishments

Much like stopping creditor calls, halting garnishments is a complex legal process. Unless legally required to do so by an LIT, creditors are unlikely to stop a garnishment once it has begun.

Filing a Consumer Proposal or Bankruptcy

Debt relief companies and credit counselling companies cannot file a Consumer Proposal or Bankruptcy unless they are Licensed Insolvency Trustees. If a company claims they can, it could be a scam where they charge a large upfront fee before directing you to an actual LIT.

Choosing a Trustworthy Debt Relief Agency

Open Communication with Creditors

Maintaining open lines of communication with your creditors is key to gaining their understanding and cooperation. Refusing to speak with them is counterproductive.

Careful Review of Agreements

Ensure you read and understand the details of any agreement you enter into with a debt relief company. Pay special attention to the payment schedule and how your payments are distributed.

Non-profit Credit Counselling

Before deciding on a specific debt relief option, consider speaking with a non-profit credit counsellor. They can provide a free and confidential review of your situation and guide you towards the best solution.


Knowing how to spot Canadian debt relief scams can save you from financial distress and help you make informed decisions. When in doubt, consider reaching out to a Licensed Insolvency Trustee or a non-profit credit counsellor. Remember, there are no quick fixes when it comes to debt relief, and any company promising such is likely not trustworthy.

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