When you are deep in debt and looking for solutions it’s important that you know who you are turning to.
Unfortunately there are too many debt settlement companies’ out there offering questionable services to consumers desperate to find help dealing with their debts. A consumer alert issued by the National Association of Consumer Bankruptcy Attorneys (NACBA) in the US issued another warning that ‘Debt Settlement Programs‘ are the number one threat to the most indebted consumer.
Private debt settlement is a growth business, not only in the US, but in Canada as well. Bankruptcy trustees in Canada see numerous examples of how these debt settlement programs don’t work. Canadians are deep in debt and looking for a way out and debt settlement seems like an attractive option. But consumers need to be cautious.
“Bombarded with slick radio and Web advertising falsely promising a smooth road to being debt free in a short period of time, these companies prey on the most desperate victims of the economic downturn. These particularly vulnerable consumers usually end up getting sued, stuck with outrageous fees, more deeply in debt, and far worse off in terms of their credit score.”
Debt settlement ‘programs’ encourage debtors to default on their debts, often advising them to pay the funds instead to the debt settlement company while they negotiate a settlement with their creditors. Unfortunately, while you are no longer paying your creditors your debts are increasing, interest and penalties are being charged and you may be subject to aggressive debt collection calls. In the event that the debt settlement company is unable to negotiate an agreement (in 9 out of 10 cases in the US study) the consumer now finds themselves more in debt with an even worse credit rating.
With many of these debt settlement companies opening in Canada, The Ministry of Consumer Services issued a similar warning to consumers to exercise caution when considering a contract for debt settlement services.
What do you do if you need debt help?
There are debt settlement options that will work in Canada. A debt management plan through a not-for-profit credit counsellors can be an option, but must be vetted carefully. The US study warns that “Just because an organization says it’s a “nonprofit” there is no guarantee that its services are free, affordable or even legitimate.”
The only ‘government’ program in Canada is to file a consumer proposal or bankruptcy. We recommend that you research the different options available to you and then talk to a federally licensed trustee in bankruptcy to explore those options in full.