Nowadays there aren’t many taboos left in Canadian society, but one taboo that has persisted over the years is debt. Unfortunately our reluctance to talk about debt often results in a lot of misinformation being taken for truth, particularly where debt assistance providers are concerned. There are many who use the private nature of debt management solutions to press their own advantage by continuing to play on consumers’ misgivings surrounding their debt problems. As government-licensed Insolvency Trustees (formerly known as Bankruptcy Trustees or Proposal Administrators) we’re here to set the record straight:
Myth: Bankruptcy Trustees work for the Creditors
Licensed Insolvency Trustees (who are the only people legally empowered to file consumer proposals) are officers of the court, which means they are actually independent parties. While the trustee has a duty to ensure that the person seeking financial help follows the legal processes, the trustee also ensures the same of the creditors and protects the individual (who has generally chosen their own trustee) from action the creditors could otherwise take against them. For many people facing financial difficulties, a Licensed Insolvency Trustee is their best ally.
Myth: Filing a Bankruptcy or Consumer Proposal Ruins your Credit Forever
Both a credit counselling program and a Consumer Proposal will be reflected on a person’s credit history for two years following completion of the program or proposal. A first-time bankruptcy will remain on a credit report for six years following the individual’s discharge. There is absolutely no truth to the myth that either bankruptcy, credit counselling or a Consumer Proposal will impede a person from getting future credit forever. Even during the time that the debt restructuring is noted on a credit history report it is still possible to obtain credit such as a mortgage, vehicle financing or even a credit card. Learning how to rebuild your credit is one of the skills that a qualified insolvency counsellor helps with. For many people facing financial difficulty, their best strategy is to face their debt problem head on, take the short term hit to their credit and then successfully rebuild. This is often faster, and more achievable than continuing to make minimum monthly payments for months, years, or even decades.
Myth: Bankruptcy Trustees and Proposal Administrators don’t Solve Debt Problems
One credit counselling association’s founder went so far as to state that “The trustees say pay off only a portion of what you owe. That’s irresponsible.” In fact, the end goal is not to evade responsibility at all. Bankruptcy restructuring is aimed to give the honest but unfortunate person a way to alleviate debts that are unmanageable, and many of those individuals struggle for years before coming to the decision to file a bankruptcy. Financial credit counselling sessions are part of the bankruptcy and Consumer Proposal processes to help people further understand any underlying issues that may have contributed to their financial difficulties, and to help them learn new financial skills. What consumers may not realize is that many credit counsellors actually refer clients they are incapable of assisting to Licensed Insolvency Trustees because of the specialized authority and options they hold.
Myth: Consumer Proposals are Lengthy and Costly
The reality of Consumer Proposals is that there is no “one size fits all” – the terms offered to the creditors are varied according to the needs of the person making the proposal. One of the guidelines is that a Consumer Proposal must be completed with 60 months, although terms of 24 to 48 months are common. When it comes to cost: All administration costs are included in the payment amount offered to the creditors, which means there is no extra out of pocket fee to the person making the proposal.
Separating fact from fiction isn’t always easy, so if you’re faced with a debt problem find out the facts before making decisions and committing to a process. A Licensed Insolvency Trustee will meet with you at no cost or obligation – knowing is not owing!