debt advice

Should You Use Debt Advice Services?

If this is your first time looking for professional help to deal with your debt problems, you may not know where to turn for debt advice services – or whether you should even be using these services at all.

First off, yes. The sooner you get debt advice help, the more options you may have available to you to finally deal with that debt. But be aware that…

Not All Debt Advice Service Providers Are Created Equal 

There are many options out there for dealing with our debts. You’ve got not-for-profit credit counselling agencies, for-profit credit counselling companies, and Licensed Insolvency Trustees, to name a few.

So to whom should you turn for debt advice?

Let’s take a look at some of these financial professionals and whether they can, in fact, help you reduce your debt.

Licensed Insolvency Trustees (LIT)

LITs are considered some of the best financial advisors in the country and the only ones licensed by the federal government of Canada.  

Licensed Insolvency Trustees:

  • Are professionally educated and qualified to provide debt relief services. LITs are federally licensed and regulated. Their education also requires that they undertake practical training and pursue continuing education.
  • Provide debt relief services that are in your best interests. LITs must abide by strict ethical regulations that assure you get advice that will actually help you – as opposed to advice that pads their own wallets.
  • Provide a full range of debt relief options, from simple budgeting to Bankruptcy.
  • Are the only professionals authorized to assist debtors in Canada with filing Bankruptcy, Consumer Proposals, Division I Proposals, Receiverships and CCAA Monitoring . And it bears noting that the options offered by a Licensed Insolvency Trustee are the only options that provide a stay of proceedings which gives you legal protection from your creditors. When you file for protection with a Licensed Insolvency Trustee your unsecured creditors are stopped from going after you – by way of a lawsuit, wage garnishment or even collection calls. 
  • Most LIT’s do not charge any up-front fees to review and discuss your options and would clearly explain any fees, before assisting you with your debt issues. For example, if you are eligible for – and decide to file – a Consumer Proposal, your LIT will be paid out of the money that would otherwise go to your creditors. You will not incur any sign-up or front-end fees. 
  • Offer their initial consultation service for free. At the initial consultation, your LIT will comprehensively review your financial circumstances and advise you on all applicable debt relief options available to you, as well as the pros and cons. They will also provide you debt help advice on which might be the best option for you and your family. You will walk away knowing your options to help you out of debt and how those options will impact you.
  • May be able to negotiate repayment of only a portion of your debts, depending on which debt relief option is best for you. For example, if you file a Consumer Proposal, you may be able to reduce your debt by paying only a percent % of what you owe, rather than having to pay back the entire amount in full.
  • Are able to provide you with credit counselling sessions intended to help you better manage your finances going forward. If you end up filing a Consumer Proposal or Bankruptcy, you are required to attend two credit counselling sessions with your LIT. During these sessions, your LIT will arm you with the tools and knowledge you need to better handle your finances going forward, so you don’t end up in the same position in the future. 

Debt Consultants

Contrast LITs with Debt Consultants, whose services are by and large unregulated by any agency, let alone the federal government. 

Debt Consultants:

  • Are not required to have any type of formal education or professional qualifications to hold themselves out as such.
  • Typically run as call centres that charge you hundreds to thousands of dollars, purporting to be able to help you with your debt.
  • Cannot offer you legal protection from your creditors.
  • Make you pay their fees upfront. In many cases, you’ll need to sign a contract that ensures they get paid – even if they ultimately don’t help you resolve your debt.
  • Will charge you a fee, only to refer you to an LIT. We have had many clients come into our offices on referral from a Debt Consultant that they paid. You don’t need a referral to see an LIT. All you need to do is pick up the phone and contact one! 

Credit Counsellors

While there are some legitimate non-profit credit counsellor agencies out there that attempt to help debtors with their debt, for-profit credit counsellor companies are taking over. 

A Credit Counsellor essentially negotiates with your creditors on your behalf to consolidate your debts, which you pay directly to the credit counselling company. 

The main things to consider – when it comes to Credit Counsellors and the debt repayment plans negotiating on your behalf are:

  • Participation in any debt management plan by your creditors is voluntary. Your creditors choose whether or not they want to participate. 
  • You will need to repay your debts in full. Your counsellor may be able to negotiate, to reduce, or stop future interest, but you’ll still be responsible for repaying 100% of that debt back.
  • You do not legally bind your creditors. Credit Counsellors do not offer services that legally protect debtors from legal action or garnishments.  Only a LIT can administer debt relief options that offer these protections, such as Consumer Proposals and Bankruptcy.  
  • Not all your debts are included. Unlike a Consumer Proposal, for example, debt repayment plans cannot compromise debts for things like taxes or student loans. If you choose to file a debt management plan with a Credit Counsellor, you’ll still be responsible for repaying these, as well as those unsecured creditors who opted out or refuse to accept the debt management plan.
  • Because a Credit Counsellor can’t reduce the total outstanding debt you have to pay back, your monthly fee may not be one that you can afford. 
  • Many not for profit and for-profit credit counselling agencies, are still going to charge you a fee for their fees. This can be up to 15% on top of the monthly debt payments you owe, and in some cases a sign up fee as well.
  • A debt management plan has the same effect on your credit score as – say – a Consumer Proposal. Many debtors believe only insolvency will damage their credit score. A debt management program actually carries a credit rating of an R7 that lasts two to three years after completion on a debtor’s credit history. It affects your credit rating the same as a Consumer Proposal – only without the benefits of proposal, legal protection and a reduction in the amount you need to pay back to creditors.

So How Should You Go About Getting Debt Advice Services?

Step #1. Do your research.

Seek out a qualified debt advisor, with the proper education and credentials, who is fully able to advise you on your debt relief options. 

Step #2. Make sure the professional can actually help you resolve your debt issues.

You should leave your initial consultation with options on debt relief and a plan on how you can move forward. If you’re insolvent and looking for debt help, be sure you reach out to a professional that is able to help you achieve that. 

You don’t need to pay for a referral or accept a debt management plan because that is the only service that is being offered.  Talk to a Licensed Insolvency Trustee as they are the only professionals licensed by the Federal Government of Canada to administer insolvency proceeding to help you deal with debt problems.

Step #3. Get help TODAY.

The sooner you get professional help with your debt, the more options you may have available to you. Bankruptcy doesn’t have to be your only option.

Contact a Licensed Insolvency Trustee Today

As seasoned Licensed Insolvency Trustees we want to see you succeed in your mission to becoming debt-free. At your free initial consultation, we will complete a comprehensive review of your financial circumstances and advise you of your debt relief options.

If you wish to speak to someone who cares about your financial future, contact us at 1 (888) 371-8900.  You will be treated with dignity and respect.  Let’s find your solution together.