When debt becomes overwhelming, sometimes the best thing you can do is turn to a professional for debt management help. This is often easier said than done. Many companies are nothing more than scams, charging huge fees without actually helping you deal with debt. Finding help for your debts that is both useful and trustworthy can be difficult.
Where to Get Help
These are the best, most reputable places to go for debt management help:
1. A Licensed Insolvency Trustee (LIT)
These are the most extensively trained, best regulated, and generally most experienced of all debt management professionals. Many people think that LITs only handle bankruptcies, but this is not the case.
LITs can provide debt management help that ranges from advice on budgeting and consultation on debt consolidation to administering Consumer Proposals and Bankruptcies. They are licensed and regulated by the federal government, under the Bankruptcy and Insolvency Act of Canada (BIA). Their work is subject to regular audits to ensure that all of their responsibilities under the BIA are being fulfilled. An LIT will meet with you for a free initial consultation to review your financial situation and discuss the benefits and drawbacks of each potential debt solution.
Consumer Proposals and Bankruptcies in Canada can only be administered by Licensed Insolvency Trustees. These are two very powerful tools for dealing with out of control debt. If your debt situation is beyond what can be fixed with some careful budgeting or a consolidation loan, one of these two options will likely solve your problem.
Both consumer proposals and bankruptcies provide something called a Stay of Proceedings, which protects you from any further collection attempts from creditors and ends wage garnishments. Both will give you relief from 100% of your unsecured debt, with a few exceptions, such as child support and alimony, penalties of the court, debt incurred by fraud, and student loans that are less than seven years old.
For people who can pay some of their debt, have a secure long-term source of income, and wish to pay at least a portion of what they owe, a Consumer Proposal is often a good solution. It allows you to make payments over a set period of time (up to five years) based on your ability to pay, rather than on how much you owe. At the end of the proposal, when all payments are made within the agreed time period, 100% of your unsecured debt is extinguished (regardless of what percentage of that debt you actually paid). Your creditors get to vote for or against a proposal, but once it is accepted by the majority of your creditors, it is binding on all of them.
For people who do not have the ability to pay, who do not have secure long-term income, or who need to be out of debt quickly, a Bankruptcy is often the best option. A first-time bankruptcy usually lasts nine months, after which you are cleared of all your unsecured debt (with the exceptions mentioned above). In a bankruptcy, most of your assets will be protected by Provincial legislation, but it is important to make a full declaration to the trustee of all of your assets during your initial consultation. The trustee will be able to tell you whether any of your assets will need to be surrendered to your creditors. You can then make a fully informed decision about whether bankruptcy will work for you.
2. Non-profit organizations
These offer budgeting and debt management help by providing counselling to help you learn how to manage your debt better. Some may also help you negotiate with creditors. Beware of agencies that claim to be non-profit, but charge substantial fees upfront. If you are unsure of whether or not an agency is trustworthy, check with the Better Business Bureau. Read reviews and ratings about the agency before you commit to anything.
Protecting Yourself From Scams
If you’re seeking help with debt management, be on the lookout for these warning signs that a company or individual may not be trustworthy:
- They charge upfront for their services. Reputable debt management or credit counselling companies only collect their fees after they have provided services.
- They make promises they can’t keep. Many companies make claims about things they legally have no control over. For example, no company can erase bad marks from your credit or stop collection calls. Only a bankruptcy or a consumer proposal can stop the collection calls.
- They claim to be “government approved.” Many companies use this line. While the government places regulations on debt management companies, they don’t approve any of them.
- They are not licensed in Canada. In some cases, companies will claim to be licensed. They might be, but not in Canada. American debt management companies do not have the same licensing requirements as Canadian companies.
If any company makes these kinds of claims or promises and charges large fees upfront, it’s best to steer clear to avoid wasting money and going further into debt.
Finding trustworthy debt management help can be difficult if you don’t know what to look for. The best place to start is with a certified Licensed Insolvency Trustee.