Get to know your debt help professionals
You're having trouble paying your bills, your credit cards are maxed out, and you're running out of options and ideas concerning your finances. You know it's time to get help, but you have no idea how to get started or who to contact.
There are so many people and organizations that claim to offer relief from your debt troubles, and each is unique in its approach and the services it offers. Here's how to seek out the professional that best suits your current situation.
Who they are
Credit counsellors are offered through many Family Services outlets throughout Canada, as well as through specialized organizations. It's important to note that some credit counsellors are certified under a governing body, such as Credit Counselling Canada, while others are not. Finding a counselling service that works through a governing body ensures that your debt help professionals have a minimum standard of education and must follow certain rules about how they do business.
How they're trained
Initial accreditation requires that credit counsellors take part in a six- to eight-week training program.
In addition, governed counsellors may be required to go through additional training. For instance, Credit Counselling Canada requires that all its credit counsellors are required to be certified as Accredited Financial Counsellors Canada (AFCC) and to maintain 30 continuing education units every two years, says Patricia White, executive director of the organization.
What they offer
Credit counselling services can offer a full assessment of your current financial situation, as well as education about money and debt management. You don't need to be in financial distress to talk to a credit counsellor.
"Often, the people that we see are looking for information about personal finances," White says. "Choices such as filing for bankruptcy or considering a consumer proposal are included in the discussion along with other options with the pros and cons of each for the individual situation."
Credit counsellors can help you decide what your best plan of action is, as well as set up a debt repayment plan with your creditors that allows you to get back on track. White says if a consumer proposal or bankruptcy is the best path, an insolvency trustee is the professional you're looking for.
What they cost
The cost of credit counselling services depends on the plan of action you require. Often, you can get a consultation appointment that's free of charge. Options such as debt repayment plans, on the other hand, have a maximum set fee, depending on what your situation requires.
However, if you're in a financial pinch, you can still get help.
For example, "Credit Counselling Canada has a fee policy which states that no one is denied service even if they are unable to pay," White says. "Services such as education and money management assistance are most often provided at no cost."
LICENSED INSOLVENCY TRUSTEE
Who they are
Licensed Insolvency Trustees are licensed by the government to help you craft a plan and file a consumer proposal or bankruptcy.
How they're trained
To be licensed by the Office of the Superintendent of Bankruptcy (OSB), the federal body overseeing insolvency trustees in Canada, a trustee has to complete courses through the Canadian Association of Insolvency and Restructuring Professionals (CIRP). The courses are followed by the CIRP National Insolvency Exam, then the Insolvency Counsellor's Qualification Course. Then, the candidate goes before an oral board, where different scenarios are presented to make sure the trustee is ready to help clients.
"They put you through the ringer," says Dana MacRae, a Licensed Insolvency Trustee based out of Stratford, Ontario. "It's pretty rigorous"
Trustees are also subject to ongoing oversight by the OSB and must adhere to federal standards of practice, including a code of ethics.
What they offer
Licensed Insolvency Trustees can offer some of the same options as credit counsellors - they can informally approach creditors to work out a debt repayment compromise on behalf of their clients. They also have the legal authority to complete a formal consumer proposal, but if creditors don't want to bite, trustees have a few more tools available to use through the Bankruptcy and Insolvency Act (BIA).
"We just have to get 51 per cent of creditors to agree to the compromise," MacRae says. "Then all the creditors have to accept the proposal. So that's a pretty big difference between us and a credit counselling association. They don't have that cram-down feature."
MacRae says clients are asked to sign a sworn statement of affairs detailing their financial situation. This may make creditors more willing to accept a compromise.
If a consumer proposal is not possible, the debtor has to consider a bankruptcy, MacRae says. Licensed Insolvency Trustees can take you through that process, too.
What they cost
As with credit counsellors, the cost of an insolvency trustee depends on what each client requires.
"For informal proposals, pricing would be geared to the amount of work that will be involved to put something together that the creditors will be willing to accept," MacRae says. Consumer proposals and bankruptcies, however, are subject to a tariff set by the BIA. You would pay a fee for the trustee's time on top of that tariff.
However, just as with credit counsellors, there are provisions for clients with little or no income. If a debtor has little or no income, and there's a great deal of hardship, "the debtor can complete a financial hardship proposal through the OSB to help pay the trustee," MacRae says.
Bank representatives are often trained by their financial institution. They often can help you negotiate tough financial situations with advice and products they offer. One option they're likely to offer is a debt consolidation loan. They'll help you to decide if you'll be eligible for that option and if it's right for you. Bank representatives also can help you find any further assistance you may need.
DEBT ADVISERS, NON-GOVERNMENT AFFILIATED AGENCIES, AND
There are many businesses out there that offer to help you out of your debts. Some claim they can fix your credit or get you a program through which you have to pay only some of your debt.
MacRae recommends caution if you choose to use non-regulated professionals. He says he's worked with credit counsellors who are associated through Canada Credit Counsellors, but other counsellors are not licensed and are harder for the government to keep accountable.
"There are some organizations and people out there that will take advantage of vulnerability," MacRae says. "I've had a number of cases where people put down money and then the organization can't help so then these people are out their money."
The Financial Consumer Agency of Canada also warns you to be careful who you trust.
"Be very cautious about companies that claim that they can negotiate a deal with your creditors so that you will only have to pay part of your debt," the Government of Canada's website states. "This process is often called ‘debt settlement' or ‘debt negotiation.' Be aware that some companies may misrepresent the services they offer as being part of a government program. This is not accurate."
Once you've chosen a debt professional, you should do some preliminary research as to which debt help plan is right for you, so you are informed before you speak with anyone. Doing some planning beforehand will help you spot any suspicious advice.See related: 5 signs you need to get debt help, 9 financial experts: 'If you only do one thing this year, do this'
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