Mandatory credit counseling is a requirement for people going bankrupt or making a consumer proposal, and is intended to give debtors money management skills for the future.
If you’re dealing with debt that you can’t afford to pay off, the first step to debt relief is always going to be speaking to a Licensed Insolvency Trustee.
Once you do this, you’ll find that there are numerous requirements connected to both filing bankruptcy and a consumer proposal.
One of the key requirements is credit counselling.
Many people are often unsure about what this is and how it could benefit them.
So, let’s break it down.
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What Is Credit Counseling?
Credit Counseling is a term that you will often find used around the financial market.
However, it’s important to realize that it isn’t always used correctly.
Credit counselling should be a description of a service that bankrupt individuals can use to gain knowledge that they should have on financial matters.
They will help ensure that you are fully aware of the issues that may have led to your debt.
They might also describe some of the warning signs that you need to watch out for and ensure that you have strategies in place to avoid debt in the future.
Is Credit Counseling Necessary?
There is a significant debate about whether credit counselling is necessary for those who are declared insolvent.
Regardless of the opinions on each side of the issue as of writing this article, it is still a legal requirement in Canada as laid out by the Office of the Superintendent of Bankruptcy (OSB).
This could change in the future, however many trustees believe that credit counselling is useful and potentially there should be more sessions.
Why is this?
It’s fair to say that no one accumulates enough debt to need to file bankruptcy overnight.
The debt slowly builds and there are signs that people should be aware of.
Indeed, an insurmountable level of debt can take years to grow and there are often numerous points where an individual would be able to take alternative action if they could recognize the signs.
Furthermore, it’s quite common for people to end up back in debt even when they have gained debt relief.
This is often due to the fact that they fall back into the same habits because they don’t understand where they went wrong in the first place.
Credit counselling is one of the requirements because trustees and financial experts believe it can help prevent this issue.
They suggest that with the right level of counselling individuals should never end up in a situation where they are unable to deal with the debt they accumulate.
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If you are interested in learning more about the process of filing for bankruptcy and the path that you will need to take, please make sure that you contact us today.
We have helped countless individuals gain debt relief and we’re confident we can support you too.