When the burden of debt becomes unbearable, seeking professional assistance is often the most logical step. However, engaging such services is not always straightforward. The landscape is littered with companies that charge exorbitant fees without delivering any substantial aid to address your debt concerns. It’s therefore crucial to find reliable and effective debt management help.
Sources of Reliable Help
Below are credible sources you can turn to for debt management assistance:
1. Licensed Insolvency Trustee (LIT)
LITs are arguably the most competent professionals you’ll find in the field of debt management. Contrary to popular belief, LITs offer more than just bankruptcy services.
Their range of services includes budgeting advice, debt consolidation consultation, and administration of Consumer Proposals and Bankruptcies. LITs operate under the regulation of the federal government, in accordance with the Bankruptcy and Insolvency Act of Canada (BIA). Regular audits are conducted to ensure LITs fulfill all their responsibilities under the BIA. Meeting an LIT for an initial consultation is typically free. During this meeting, they will review your financial situation and discuss the pros and cons of potential debt solutions.
Only LITs can administer Consumer Proposals and Bankruptcies in Canada. These are potent tools for dealing with uncontrollable debt. If your debt problem is beyond what budgeting or a consolidation loan can fix, one of these two options may be your solution.
Both Consumer Proposals and Bankruptcies offer a Stay of Proceedings, which safeguards you from further collection attempts by creditors and ends any wage garnishments. Both will relieve you from 100% of your unsecured debt, with a few exceptions like child support and alimony, court penalties, debt incurred by fraud, and student loans that are less than seven years old.
A Consumer Proposal is often a good solution for those who can pay some of their debt, have a secure long-term income, and wish to pay at least a portion of what they owe. It allows you to make payments over a set period (up to five years) based on your ability to pay, rather than how much you owe. At the end of the proposal, provided all payments are made within the agreed time, 100% of your unsecured debt is eliminated, regardless of what percentage of that debt you actually paid back. Your creditors get to vote on the proposal, but once accepted by the majority, it’s binding on all of them.
Bankruptcy is often the best choice for those who cannot pay their debt, lack a secure long-term income, or need to be debt-free quickly. A first-time bankruptcy usually lasts nine months, after which you’re cleared of all your unsecured debt (with the exceptions mentioned above). Most of your assets will be protected by Provincial legislation in a bankruptcy, but you must declare all of your assets to the trustee during your initial consultation. The trustee will then inform you which of your assets will need to be surrendered to your creditors, enabling you to make an informed decision on whether bankruptcy is the right choice for you.
2. Non-profit Organizations
Non-profit organizations offer budgeting and debt management help, often providing counselling to help you better manage your debt. Some may even help negotiate with your creditors. Be cautious of agencies that claim to be non-profit but demand substantial upfront fees. If you’re unsure about an agency’s credibility, check with the Better Business Bureau, and read reviews and ratings about the agency before committing.
If you’re unsure about where to seek help with your debt, listen to this podcast by Leigh Taylor. He explains the differences between debt consultants, credit counsellors, and Licensed Insolvency Trustees.
Guarding Against Scams
As you seek debt management help, be wary of these red flags indicating that a company or individual may not be reliable:
They demand payment for their services upfront.
Reputable debt management or credit counselling companies only collect their fees after they have provided services.
They make unattainable promises.
Many companies make claims about things they legally have no control over. For instance, no company can erase negative credit marks or stop collection calls. Only a bankruptcy or a Consumer Proposal can stop the collection calls.
They assert to be “government approved.”
Many companies use this line. While the government regulates debt management companies, they don’t approve any of them.
They are not licensed in Canada.
In some instances, companies will claim to be licensed. They might be, but not in Canada. American debt management companies don’t share the same licensing requirements as Canadian companies.
If a company makes any of these claims, or demands large upfront fees, it’s best to avoid them to prevent further financial loss and deeper debt.
Identifying trustworthy debt management help can be challenging without knowing what to look for. The best place to start is with a certified Licensed Insolvency Trustee.
