The wrong advice can cost you more than money.
Being in debt can be stressful and there are a lot of options out there when looking for help. Being an informed consumer helps you to avoid the wrong advice. There are both licensed and unlicensed debt advisors in the Canadian market, and knowing the difference between them can make your journey into debt relief a lot smoother.
Recently, the Canadian government, through the Office of the Superintendent of Bankruptcy, who manages the implementation of Canada’s Bankruptcy and Insolvency Act, issued a paper outlining the problems for Canadians who are dealing with unlicensed debt advisors, including “non-profit” businesses. That this government agency is looking into the abuse of consumers through these unlicensed businesses is a good indication that the problem is a serious one.
Recently there have even been reports of some well-known credit counselling companies that are under investigation. One example of this is that Cactus Credit has had its accounts frozen by the government.
How to Recognize Poor or Incomplete Advice
The big question for consumers, is how do you recognize bad advice coming from debt advisers, so that you can avoid losing more of your hard-earned money? It is not as easy as you might think.
Here are a few signs that will indicate that the debt advisor you are dealing with is not looking after your best interests. If any one of these occur when you contact them, you can be sure you are not getting the best advice available.
- They indicate that they will refer you to a Licensed Insolvency Trustee. You NEVER need a referral to see an LIT. You can meet with one by simply contacting them and making an appointment.
- They require you to make a sizable up-front payment.
- They offer to refer you to a Licensed Insolvency Trustee (LIT), but only once you have completed the up-front payment to them.
- They direct you NOT to contact a LIT directly.
- They work out a proposal with you that has you paying them a large up-front sum, followed by payments to your creditors through a LIT of their choosing, usually followed by more payments to the debt advisor before you make your final payment to the LIT.
- They claim to be “non-profit” but still charge a very generous up-front fee.
- The ONLY option they offer is a payment proposal to your creditors. If you are getting complete information and advice, there should be a variety of solutions for you to choose from. Being offered only that one solution is usually a sign that either the person advising you is not a LIT and does not have a full range of options, or is a LIT who does not have an office in Manitoba, so other solutions are too cumbersome for them to deal with regardless of whether or not they would be better options for you.
There are all kinds of problems with payment “proposals” arranged through a debt advisor rather than a Licensed Insolvency Trustee. First, you will pay more than necessary, to cover the sizable fees of the debt advisor. Secondly, your creditors will receive very little of the money you pay, since most if going to the debt advisory company. Lastly, if the proposal does NOT involve a Licensed Insolvency Trustee, it is not binding on your creditors. You could end up paying a LOT of money, only to have your creditors resume collection on you once the proposal is completed.
How are Licensed Insolvency Trustees different?
When it comes to getting help with your debt, Licensed Insolvency Trustees are different in some very important ways as follows:
- As indicated by the title, Licensed Insolvency Trustees (LIT) are the only companies in the debt-help field that are legislated, licensed, and regulated by the Government of Canada (A debt advisor is not licensed or regulated by anyone).
- LIT’s are the only debt professionals who studied, apprenticed, and gone through a multi-year series of examinations to become experts on debt relief and the Bankruptcy and Insolvency Act.
- LIT’s and their staff have passed courses to become certified experts on financial counselling.
- An initial consultation with a Licensed Insolvency Trustee is entirely free and there is no obligation to use their services following that meeting. Only if you choose to file either a Consumer Proposal or a Bankruptcy with the LIT, will you begin making monthly payments to the LIT. These are payments for the benefit of your creditors, and are based not only on what you owe, but also on what you can afford.
- All fees of a LIT are set and regulated by the federal government and are taken from the payments paid to the creditors. In other words, the creditors pay the fees.
- A Consumer Proposal or Bankruptcy through a Licensed Insolvency Trustee are legally binding on your creditors. The informal proposals that a debt advisor can offer is just that – informal. It has no legal backing behind it.
- LIT’s are officers of the court, so they can stop garnishments by issuing a Stay of Proceedings.
Not for Profit Agencies
A phrase that deserves some more attention and sometimes can be misleading is that the company is “not for profit.” To most, you would think this means that they are a charity, only established to help the honest, but unfortunate debtor get out of debt. This is not always the case!
This phrase often only means that they don’t have a profit to show once all of the expenses are paid. Those expenses include the wages and bonuses of managers for ‘helping’ so many poor Canadians. Bonuses in particular are a very flexible way to zero out the bottom line of the company. Another thing to be aware of is that many of these “non-profits” are not based in Canada themselves!
Things that Only a Licensed Insolvency Trustee Can Do
By dealing with an LIT you can be assured that you are dealing with a professional who knows all of the rules and regulations around debt help. You can also be assured that all of your dischargeable debts will be included in your ‘get out of debt plan.’
When you deal with other non-LIT companies, who claim to help with debt, you will find that not all of your creditors are bound by the plan. Those creditors who disagree, can still continue to collect from you. With a Consumer Proposal or Bankruptcy, all of the unsecured creditors are bound by the agreement.
These other non-LIT organizations cannot help if your wages are being garnished, nor can they stop any Statements of Claim filed against you; only a Licensed Insolvency Trustee can truly help stop those actions against you. That is because when you file with a Licensed Insolvency Trustee, only the LIT can issue a legal Stay of Proceedings. That means that no one can sue you, garnish your wages or take any other collection practices against you. Other non-LIT companies, claiming to help you, don’t have that tool in their toolbox!
Who does a Licensed Insolvency Trustee work for?
The answer to that question depends on where in the process you are. What many people don’t understand is that a Trustee wears different hats throughout the insolvency process. When you meet with a Licensed Insolvency Trustee for a consultation, they are gathering all of the specifics of your situation, so that the LIT can provide YOU with the BEST solution for YOU.
An LIT will give you all the information to allow you to make a decision that is in your best interests, not in the Trustee’s or the creditors. An LIT wants you to pick the best solution for you; they are not trying to take advantage of you. At that point, they are working for you.
After you file a Consumer Proposal or a Bankruptcy, however, the Trustee works for the unsecured creditors to ensure that they each receive their fair share of any proceeds from the insolvency.
Not all Debt is Bad
No one wants to be in debt, but debt is not a bad word. Some debt can be necessary. For example, if you would like to purchase a car or a house, you will likely need a loan or a mortgage to make that happen. In this case, debt is good. A better word to think about is “debt help,” and that is what a Licensed Insolvency Trustee can provide.
LCTaylor is a Licensed Insolvency Trustee.
At LCTaylor, we are not embarrassed by the word debt, like some secret that can only be spoken of in whispers. Instead, we believe in finding solutions to the issue. If you can’t discuss the elephant in the room, how can you fix it?
Why LCTaylor?
As an LIT at LCTaylor, I can tell you that we will discuss with you all of the options that would be in your best interest, so that you can make an informed decision. Providing all viable options sets us apart from those companies that are only equipped to provide one service. Our toolbox is full of tools to help you get out of debt.
We will not suggest only the options that are easier for us to administer, or that will make us more money in fees. Here at LCTaylor we have been in business, helping fellow Manitobans get out of debt for over 30 years. You only get that kind of history by being honest, straight forward and truly wanting to provide the best solutions – solutions that work!
Updated February 2024
Jillian Taylor-Mancusi, LIT
