In this article, we discuss the significant differences between Debt Consultants vs. Licensed Insolvency Trustees. A Licensed Insolvency Trustee is a legally regulated debt professional who provides services such as consumer proposals and bankruptcies to people struggling with debt.
A consumer proposal is a legally binding debt relief solution. It’s a settlement made between the individual and their unsecured creditors. If the consumer proposal is accepted by your creditors, it can result in a significant reduction in the total debt owed. Filing a consumer proposal is a legal process and must be carried out by a licensed insolvency trustee (LIT). No one else is legally allowed to file a consumer proposal in Canada. No lawyer, accountant, credit counselor, financial advisor, or debt consultant is able to provide this service.
Licensed Insolvency Trustees are able to do this because they are federally regulated by the government of Canada. Licensed Insolvency Trustees are not just federally licensed. They are federally regulated, too. They are subject to oversight by the Office of the Superintendent of Bankruptcy (OSB) to ensure that they’re upholding the high standards of the job and not violating a strict code of ethics. These rules are in place to guarantee Canadians the support that they need when they’re at their most vulnerable.
Debt Consultants & Debt Settlement Programs
Debt consultants are unregulated for-profit organizations that are risky at the best of times! Some debt consultants will claim to offer debt relief from creditors but without the added legal protection provided by a Licensed insolvency trustee. Many for-profit debt consultants will require you to pay upfront fees for their service. A Licensed Insolvency Trustee will never ask for upfront fees.
Most debt consultants will offer a solution called a debt settlement program to eliminate your debt. A debt settlement program requires all your creditors to agree to the terms of repayment. However, a consumer proposal only requires 50% of your creditors to agree, forcing the remaining creditors to be legally bound by the terms of the consumer proposal.
If you do decide to work with an unlicensed debt consultant company and try to reduce your debt with a debt settlement program you will be asked to withhold your payments to your unsecured creditors and you will be asked to start making payments directly to the debt consultant company. After enough of your money has been collected by the debt consultant, they will contact your creditors and attempt to strike a deal with the creditors. The hope is that after your creditors have stopped receiving payments for so long, they will be desperate enough to settle for a lump sum that is much lower than what you currently owe. It could take years for this method to work and there is no guarantee that your creditors will agree.
More importantly, if you decide to use a debt consultant and one or more of the creditors reject the offer, they could take legal collection action against you.
Debt Consultants vs. Licensed Insolvency Trustees
Debt consultants don’t have any authority over creditors. Your unsecured creditors do not have to listen to debt consultants. They don’t even have to answer their calls or emails. If a debt consultant tries to negotiate a deal with them, the creditor can break that deal at any moment because it’s not a legally binding agreement. This is what makes debt settlement programs so risky.
You could go through the entire debt settlement program, and your consultant could still fail to strike a deal with your creditors. If that happens, you’ll be in a more difficult position than when you first started. You’ll have a larger debt load. You’ll have accumulated interest, late fees, and penalties.
If you work directly with a Licensed Insolvency Trustee to file a consumer proposal and offer a reduced debt settlement to your unsecured creditors and it’s accepted by 50% of them, then you are then legally protected against any penalties, interest, fines, or legal actions, from the day you sign.
Working with a Licensed Insolvency Trustee offers peace of mind in knowing that you will not find yourself further in debt than when you started.
Beware of Unlicensed Debt Consultants
If you are approached by another debt solution company claiming to have the ability to file a Consumer Proposal on your behalf, it’s important that you ask to see their credentials or do some further research into the company. Unfortunately, there are illegitimate debt solutions companies out there that target people who are desperate. Before trusting these companies do your research and ensure they are Licensed Insolvency Trustees.
How can you be sure that you’re working with a Licensed Insolvency Trustee?
- They clearly state that they are licensed insolvency trustees (LITs) on all of their advertising and their websites (formerly known as bankruptcy trustees).
- The firm and its LITs are listed in the Licensed Insolvency Trustee Registry.
- A Licensed insolvency trustee will never ask for Upfront fees.
If you don’t see any of these clues, then you should steer clear of this company. They are not a licensed insolvency trustee and cannot file a consumer proposal for you.
Warning Signs You’re Dealing With a Debt Consultant
- You can’t see any specific mention that they are licensed insolvency trustees on their website.
- They ask for fees upfront.
- Debt settlement programs aren’t regulated, so they can charge you steep and excessive fees.
- If the organization is pushing you to make a decision quickly, then you should take a step back.
- A licensed insolvency trustee will assess your financial situation and advise you on your options. They won’t push you to sign onto a service that you don’t want or need.
- The website has no customer reviews, or they have customer reviews that look fabricated.
- They won’t let you see the full contract prior to signing and allow you sufficient time to read and understand the contract.
David Sklar & Associates, We Are Licensed Insolvency Trustees
Licensed insolvency trustees like David Sklar & Associates have the authority to contact creditors and legally hold them to agreements. So, when you file a consumer proposal, and a creditor accepts it, that agreement is legally binding. The creditor has to adhere to the terms set in the proposal from that point forward.
If you are struggling financially and looking for relief, call David Sklar & Associates and book your consultation today. We offer consumer proposals in Toronto to help honest people who are drowning in unsecured debt and need an effective way out.
We also offer division one proposals and personal bankruptcy services for people who can’t meet the qualifications of a consumer proposal. You have options. We can help you pick the right ones and get the relief that you’re looking for.
