When you are sick, you go to the doctor. If you need to see a specialist, your family doctor refers you to someone who can help you with your specific illness. But what happens when you have a debt problem? Where do you go? Who should you talk to?
In the debt industry in Canada there are two accredited types of debt specialists: Credit Counsellors and Bankruptcy Trustees. Both are experts in their field. (This is assuming you are dealing with qualified, licensed professional. We’ll talk more about that later). Each type of debt expert provides different support and services. Which you choose depends on what you need.
Credit Counsellors can be an excellent resource when dealing with debt problems – just make certain you are dealing with an accredited credit counselling agency in Canada and not someone simply using the term credit or debt counsellor. Even some not-for-profit agencies do not employ accredited counsellors. If you talk to a credit counsellor, ask if both the agency and the individual debt counsellor are accredited and certified. If not then you should be very cautious in your dealings with them.
Credit counselling agencies in Canada excel at client education. They can help you look at the causes of your financial problems, whether lack of budgeting, overspending or too much debt.
Credit counsellors cannot provide you with legal protection – their debt reduction services, known as a Debt Management Plan, are voluntary for individuals and lenders. If what you really need is help with budgeting and planning, credit counsellors are a great fit. If you are dealing with only a small amount of debt that you can afford to repay in full, just need help with a payment plan, credit counsellors can help.
If you see a credit counsellor and they think your situation requires the services of a licensed trustee they will tell you so. This happens when your debt load is so great that there really is no way that you can reasonably be expected to repay your debts in full. You need to file some sort of legal remedy that credit counsellors are not authorized to perform. They will then refer you to a Trustee in Bankruptcy. A word of caution: you should never have to pay for a referral to a bankruptcy trustee. Most trustees in Canada (and all those on our site) offer a free, initial consultation.
Bankruptcy Trustees in Canada are licensed by the federal government to administer debt relief under the Bankruptcy and Insolvency Act. They are the ONLY debt advisors licensed by the government (federal or provincial). If anyone tells you they are offering federally approved programs or counsellors, ask them if they are talking about a trustee in bankruptcy. If they say no, they are not telling the truth.
Bankruptcy trustees settle your debts through bankruptcy or through a consumer proposal. Both of these options provide you with immediate legal protection from your creditors and both settle your unsecured debts.
If you have seen people advertising or calling themselves proposal administrators it is because they are actually licensed trustees in bankruptcy – all trustees are licensed to administer proposals. As consumer proposals have become more popular, and understood, bankruptcy trustees have begun to use the term Consumer Proposal Administrator. Since many people want to avoid filing bankruptcy, this term is more meaningful, and a little less scary. In either case, if your money problems are a result of too much debt, a bankruptcy trustee is an excellent person to talk to.
A good trustee will not try to talk you into filing. They will review your situation with you and talk about your alternatives. You should feel free to go home and think about what you would like to do if you need more time. If you feel pressure, walk out and talk to another trustee. The same goes for any credit counsellor you see. Never make a decisions become someone is pressuring you.
Most licensed trustees are also accredited credit counsellors. As part of the bankruptcy or consumer proposal process you will receive, through your trustee or someone they refer you to, at least two credit counselling sessions where you can learn new money management and budgeting skills to help you after your bankruptcy or proposal is completed.
If you see a licenced trustee and they don’t think you require a consumer proposal or need to file for bankruptcy then the trustee can recommend a credit counselling agency. If what you really require is budgeting assistance and education then credit counselling is where you should be.
As you can see, talking to a debt professional is like seeing the right specialist. Ask yourself how deep in debt you are, what type of protection you need, and how much you can afford to repay. This will help you choose what type of debt advisor you need.
Send an email to one of our advisors today about your situation. They can help guide you in the right direction.