If your debt is making money management difficult, it’s time to look into your debt relief options. But there’s more to consider than whether a debt consolidation loan or a consumer proposal is best.
You’ll need to decide which debt professional is best suited to help you: a Licensed Insolvency Trustee (LIT), credit counsellor or debt consultant. Let’s consider the differences.
Licensed Insolvency Trustees (LITs) are highly qualified financial professionals that are federally licensed by the Office of the Superintendent of Bankruptcy Canada (OSB) to help you solve your debt problems. LITs must adhere to strict legal and ethical guidelines, which include making sure you understand all of your debt relief options (not just the debt solutions that an LIT provides). If you decide a consumer proposal or bankruptcy is the right solution for you, an LIT is the only debt professional authorized to administer these two legal solutions (called insolvency proceedings).
Credit counselling services are offered through for-profit and not-for-profit credit counselling agencies. Credit counsellors offer financial advice and education on credit and debt management, budgeting and more. A credit counsellor can also arrange a debt management plan with your creditors. Some credit counsellors are accredited, and others are not; training and qualifications may vary from agency to agency. While there are provincial and national associations that oversee credit counselling agencies, credit counsellors are not federally regulated like LITs.
Debt consultants usually works with a debt settlement company. A debt consultant will offer to negotiate a settlement with your creditors that can result in repaying less than what you owe. Debt consultants are not federally regulated; and some debt settlement companies use questionable sales tactics and are misleading about their services and fees. Before you deal with a debt settlement company, it is a good idea to carefully review these federal guidelines detailing how you can protect yourself when dealing with a debt settlement company.
Licensed Insolvency Trustees offer free, no-obligation consultations so you can discuss your financial situation with a knowledgeable professional. An LIT will start by helping you explore debt help solutions like budgeting, debt repayment strategies, debt consolidation and debt management and debt settlement plans. Working with an LIT can help you understand if one of these solutions will work for you and will even refer you to another trusted debt professional if necessary.
Credit counsellors will almost always offer a free initial consultation so you can see if their services are right for you, but not all credit counselling agencies offer this option. A credit counsellor can create what is called a debt management plan for you. The counsellor will negotiate with your creditors to reduce your interest rates or extend your payment period on your debts. Your monthly debt payments could be lower each month, but you’ll still be repaying 100 per cent of the debt you owe. There is no guarantee with a debt management plan that all your creditors will agree to the terms. If a creditor chooses not to participate in the debt management plan, they can still pursue legal action if you can’t keep up with your payments. A credit counsellor may also refer you to an LIT if they believe a consumer proposal or bankruptcy is the best solution for you.
A debt consultant offers what is called a debt settlement plan. In a debt settlement plan, you provide a lump sum payment to the debt consultant (or debt settlement company) that is usually less than what you owe in total. There may be additional fees that vary widely from agency to agency. There’s no guarantee your lenders will accept it, and you will still have to pay the debt settlement agency a fee. Debt settlement plans do not have any legal protections in place because debt settlement plans are not legally binding.
A Licensed Insolvency Trustee is the only debt professional who can administer a consumer proposal or bankruptcy, two legal forms of debt forgiveness, governed by the Bankruptcy and Insolvency Act. If your debt is overwhelming and you are finding it increasingly difficult to keep up with your debt payments, an LIT can negotiate a formal debt solution that will result in you repaying less than your total debt – this is called a consumer proposal. When you no longer have the ability to pay your debt, an LIT can also administer bankruptcy proceedings that allow you to immediately eliminate your unsecured debt for a fresh financial start. Both options offer unique legal protections. Once you file a consumer proposal or bankruptcy, all interest is frozen and all calls from creditors and collection agencies must cease. All legal action against you, like wage garnishments, will also end. Once your LIT reaches a formal agreement with your creditors, they must abide by the agreement, as long as you complete all your responsibilities under the agreement.
No matter what your debt situation is, a debt solution needs to be the right fit for you. Take time to meet with a professional and learn what they can offer to help you resolve your debt problems. If it doesn’t feel like the right fit, don’t be afraid to walk away. A Licensed Insolvency Trustee will offer you a free consultation that is obligation-free. Talk to an LIT today to see what debt solutions might be right for you.
If you’re looking for the best debt relief professional to resolve your debt, have a free, no-obligation meeting with a BDO Licensed Insolvency Trustee as the first step towards financial peace of mind.
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