Debts Consultants and the Scams they Attempt

The Scam

“We’ll reduce your debts by 70% through a government mandated debt relief program”

“We restructure your debt through a 100% legal program approved by the court”

“We work for you and not your creditors”

Have you heard of these catchy slogans from debt consultants who will tell you anything you would like to hear?

Unfortunately, about 1 out of 4 individuals in Canada fall prey to these scam artists that will demand thousands of dollars in fees (I’ve seen contracts with fees as high as $5,000) to gather some basic paperwork and then they’ll refer you to a Licensed Insolvency Trustee to undergo a consumer proposal or as some of them like to call it a ‘government program’.

This practice and scam has become so concerning that the Office of the Superintendent of Bankruptcy is investigating these debt consultant stories and reviewing their practice of advertising consumer proposals which they cannot legally provide.

The Truth

A consumer proposal is the number 1 alternative to filing bankruptcy.

  • It is a government program.
  • A consumer proposal grants you the same exact legal protection as a bankruptcy would.

It will protect you from the following:

  • Wage garnishments or assignments or other legal action taken by creditors
  • Threatening phone calls from collection agencies stop

However, it can only be administered by a Licensed Insolvency Trustee.

Here’s the thing. Trustees don’t charge upfront fees and you don’t need a referral to see one.  A good trustee will always offer a free, confidential no-obligation consultation. So why not go directly to the source?

Unlicensed debt consultants are not your best option when seeking advice about your debt. They are not accredited credit counsellors, paralegals, lawyers or Licensed Insolvency Trustees.

Debt consultants have no authority to actually negotiate with your creditors or offer any legal protection. And this goes for not just the company you deal with, but your individual debt counsellor. Anyone you meet with should be accredited.

Trustees take the time to get to know your situation, making sure the solution you follow is best for you.

My often used analogy to describe a debt consultant service:

“Your leg is broken? Give me $1, 500 and I’ll gather the information needed to fix it. Thanks for your money, here’s a map to the nearest hospital.”

Unfortunately in today’s market, it’s almost impossible for the average consumer to discern who they can trust. Debt consultants advertise very heavily and their websites seem incredibly genuine and authentic. In many cases they even advertise services provided through a Licensed Insolvency Trustee.

Why would you go to a middle man, pay extra, when you can go directly to the source?

Recently I met with a very bright university student and her mother in my Brampton office. They both work in the financial services industry and before seeing me they met with a debt consultant who said that they would be able to make all their debts go away.  Naturally they were both quite hesitant and turned off from the aggressive tactics they were being pressured with.

They were very smart to seek out a second opinion and save themselves thousands of dollars.

If you feel you need some genuine financial help and are unsure where to turn, arrange a free consultation with a licensed insolvency trustee to discuss all your options.

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