There’s a lot to think about if you’re getting ready to meet with someone who specializes in debt restructuring. There can be a lot of new information and concepts to understand, in addition to any reservations about opening up about your financial situation to someone who is essentially a stranger. When preparing for a meeting to find out about the various debt solutions available to you, we’d suggest making note of our top four questions to ask when it comes to debt or credit counsellors:
Are they licensed? Whether or not your advisor has a wall full of certificates of education, the bottom line is that you want to be sure any advice you receive is from someone licensed and trained in the specifics of Canadian credit and debt. Many people operating as credit counsellors do not have any set qualifications or licensing. Even a stellar Better Business Bureau (BBB) rating doesn’t necessarily mean that you are dealing with a properly licensed firm. Ask if the person you’re dealing with is licensed by the federal government if you’re in doubt as to whether you’re speaking with a qualified trustee. Industry Canada is the only body that licenses Trustees in Canada. This licensing and regulation exists to protect consumers and gives you the ability to get issues resolved if things do not go according to plan (see below re: What if you have a dispute?)
How will they be paid? While it should never ever cost you to discuss your debt options, generally there will be some cost associated if you decide to go forward with a financial restructuring plan. In a consumer proposal all costs of administration are included in the amount you offer to pay the creditors, however, with some credit counsellors you will be expected to shell out for monthly monitoring, consulting fees and other levies in addition to the creditor repayment. Also be clear on whether or not you will be expected to pay upfront fees before any work will be done on your behalf.
Will the creditors work with them? Like so many other things, not all debt specialists’ abilities are created equal. Before committing to any process or program, be sure that it will cover the debts you need it to. For example, things like income taxes or student loans can only be dealt with and discharged via a licensed trustee. It’s also important to find out what will happen if any creditors are not in agreement with the plan. For example, in a consumer proposal, acceptance by 50% of the creditors who vote will mean ALL creditors are bound by its terms, whereas in other credit counselling programs you must continue to repay creditors who do not agree to the plan.
What if you have a dispute? Unfortunately with unlicensed credit counsellors, there is no regulatory body. Meaning if you disagree or have a complaint, there is no formal process in place to ensure a fair and “by the book” progression. If you’re dealing with a licensed trustee however, the Office of the Superintendent of Bankruptcy (part of Industry Canada) is the government branch in charge of trustee regulations, and procedures are in place to address disputes or requests for mediation.
While there are many factors to consider when it comes to debt and credit counselling, the main focus should be on whether or not your needs will be met and whether you feel confident and have a clear understanding about the process you choose. When in doubt, always ask! Once you know your options, the decision as to which direction to take really is all yours.