As more and more people are experiencing debt problems, the internet, radio, even television commercials offer them a confusing array of options. Most consumers are dealing with this problem for the first time, and find the various solutions offered to be somewhat overwhelming.
How Does One Decide?
The first decision to make when seeking advice and assistance with a problem is to decide who you should turn to. Your accountant? Your banker? Your lawyer? A Credit Counsellor? A Debt Consultant? A Licensed Insolvency Trustee? Let’s look at each of these.
Your accountant. This is likely someone that you know, trust, and have some background with. They do your taxes every year; they have some understanding of you and your situation. All this is true. It is unlikely, though, that they have any in-depth knowledge of the debt resolution field. The best they will be able to do is refer you to someone in the insolvency field.
Your banker. Likely a great person to work with when setting up your accounts or arranging a loan. However, the banker seldom has your best interests in mind. They are employees of the bank and are paid to have the best interests of the bank foremost in their minds when dealing with clients. Also, talking to your banker just might make them rethink your accounts. Best to let sleeping dogs lie.
Your lawyer. If you have a lawyer, he or she is someone you trust. They may be able to refer you to someone specializing in insolvency, but, just like your accountant, they may not have in-depth knowledge of the field. For some business owners, whose corporate structure is complex, consulting your lawyer first will be of value. For most consumers, though, it is unlikely that the lawyer who drew up your last will and testament will also be an expert in debt relief.
A Credit Counsellor. Credit counsellors come in a wide variety. Some purport to be non-profit societies. The ones that are, will offer budgeting assistance, helping you to sort out your priorities so that you can make changes to your lifestyle to reduce spending. That’s helpful if your debt is manageable. They will help you reorganize so that you can stop accumulating debt and pay off what you currently carry.
Other Credit Counsellors offer to negotiate a settlement with your creditors, in which you pay off the negotiated amount over an extended period of time. They charge a fee for this service. Unlike a formal Consumer Proposal done through the Bankruptcy and Insolvency Act of Canada, these informal proposals are not legally binding on your creditors. A creditor can opt out of the arrangement, or can resume collection after the informal proposal is completed. This means that you have no guarantee that the “solution” will actually solve the problem.
More recently, some Credit Counsellors and Debt Consultants are offering to negotiate a reduction of your debt, and arrange payments over a period of time on that reduced amount – a Consumer Proposal. To do that, they must “introduce” you to a Licensed Insolvency Trustee (LIT), since only LIT’s are licensed in Canada to administer Consumer Proposals. Generally, the Debt Counsellor charges the debtor an up-front fee (some as high as $4,500), to be paid before they will introduce you to the LIT of their choice. In many cases, after the Consumer Proposal is filed with the Trustee, the debtor will be obliged to make payments to both the Trustee and the Debt Counsellor on some predetermined schedule. Unfortunately, the actual creditors see very little of that money in this arrangement. Recently, there has been a move by banks to refuse proposals that come through this source.
A Licensed Insolvency Trustee. Inarguably, LIT’s are the most experienced and highly trained of all insolvency experts. They are also the only debt experts that are licensed, regulated and audited by the federal government. But here’s the really great news: YOU DO NOT NEED TO PAY ANYONE TO INTRODUCE YOU TO A LICENSED INSOLVENCY TRUSTEE. Most Trustees do not charge for an initial appointment to go over your situation and discuss solutions with you and you can contact them directly to meet with them.
MORE GOOD NEWS: A Licensed Insolvency Trustee reviews the full gambit of possible solutions for you. For some people, whose debt is manageable, they may suggest a debt consolidation loan or other refinancing options. The greatest benefit to meeting with a LIT, however, is that they have in their toolkit two programs that other credit consultants do not have – Consumer Proposals and Bankruptcies.
The most important of these is a formal Consumer Proposal. This is a negotiated settlement with your creditors, based on what you can afford to pay. Proposals can range from 20% of the full amount of the debt to 100%, based on what works for you. At the completion of the proposal, 100% (with few exceptions) of the debt is erased, regardless of what percentage the Proposal paid. Proposals can be designed to suit your situation and can last up to 5 years. They are binding on all of your unsecured creditors – that is, once the majority of the creditors accept a proposal, it is binding on all unsecured creditors. A legal Stay or Proceedings prevents creditors from attempting additional collections.
What Is The Best Deal For Debt Relief?
No doubt, it is a Consumer Proposal filed through a Licensed Insolvency Trustee, with whom you initiated direct contact. That way, you will receive the most complete information, and sure protection from collection agencies. If you file a Consumer Proposal, it will cost you much less than a proposal arranged through a third party, and your creditors will benefit more. You will have a fresh start.
If you are ready to take the first step to a brighter financial future, send us an email at questions@lctaylor.net or call us at 204-925-6400. We will discuss each of your options, answer any debt management questions you may have and help facilitate the course of action you decide to take.
Jillian Taylor-Mancusi, LIT
