If someone is experiencing financial difficulties in Toronto, this is probably the most basic question they need answered: who can help me? A credit counsellor or a bankruptcy trustee?
When you meet with a bankruptcy trustee at Hoyes, Michalos, we will review all your options. I know this for a fact. This is what I do every day. If everyone who came in to my office needed my services (meaning they ended up filing personal bankruptcy or a consumer proposal), I would be a very, very busy person.
The fact of the matter is that more than half the people I meet do not file a bankruptcy or consumer proposal. Instead, we are able to listen, review their situation, ask some questions and, more often than not, provide them with some advise and help without having to declare any form of insolvency.
So that means bankruptcy and consumer proposals are not for everyone. Under what circumstances do we refer people who call or come to see us for other solutions?
Credit counselling may be right for you if you believe you can pay your debts, but you need an interest break. Credit counselling is also called a debt management plan. A credit counsellor will negotiate a payment plan with your creditors that calls for payment of all your debts in full over a period of time with no further interest being charged.
When does credit counselling not work?
If your debts include an amount for income taxes, credit counselling can’t help. CRA, formerly Revenue Canada, will not participate in a debt management plan. They do not negotiate a reduction in income taxes. The only way that income taxes can be compromised (reduced or settled) is by way of filing a consumer proposal or a bankruptcy.
If there is a legal action against you or a wage garnishment is in place credit counselling will not work. Again, only a consumer proposal or bankruptcy will stop these.
If you do decide to use the services of a credit counsellor, make sure you use a reputable one. There are lots of “debt consultants” out there who are not interested in helping you; they are only interested in making money. If an upfront fee is involved, just say no. If you are not certain, contact us. We work with legitimate credit counselling agencies every day and can refer you to a reputable credit counsellor if that makes sense for you.
This last point is the single biggest reason why debt consultants have earned a bad reputation and why sometimes speaking to a bankruptcy trustee first makes most sense. They are not licensed as Bankruptcy Trustees and Consumer Proposal Administrators are. The licensing of a Trustee in Bankruptcy is governed by the Federal Government. First of all, a license must be obtained through a rigorous qualification process. After that, there is continued monitoring and supervision by the Office of the Superintendent of Bankruptcy.
If you can afford to pay your debts in full, but need to stop the interest clock running, a debt management plan through a credit counsellor might be best for you. If not, a consumer proposal, or bankruptcy might be the solution.
Understanding your options is important. Making the right decision, based on your personal fact situation is critical. And this is what we do best; helping individuals make the right choice. We offer free, no-obligation consultations so we are a good place to start. Give us a call today and we can help you review your options.