Sometimes debt happens to good people. Maybe the job you thought you’d have until you didn’t want it anymore is suddenly gone. Maybe your spouse has died leaving you to worry about paying all of the bills on just one income and amidst your grief. Or maybe little by little you just took on too much thinking you could handle it and now you can’t.
If you’ve found yourself in a tricky financial situation you may have already discovered that the world of debt relief is a confusing place. From credit counseling to a bankruptcy trustee and all the options in between, where do you start?
“There is so much misinformation and disinformation out there,” says Ryan Brown from 4 Pillars Consulting Group. “There’s very little transparency in the industry and, in many cases, consumers don’t know what their rights are.”
Ask questions, understand your rights
The desire to get rid of overwhelming debt, the fear that comes from not being able to make payments, and the shame that people sometimes feel for having gotten themselves in a financial mess can lead you to want a solution without asking too many questions. Ask anyhow.
First, you need to ask what the best solution is for your situation. In many cases, it’s not bankruptcy. When done properly, a consumer proposal can be the best way to solve unsecured debt, however not all consumer proposals are cut from the same cloth. How does the client really know that the structure of their proposal is absolutely the best for them when considering their specific situation? That question can only be answered by a professional who works solely for the benefit of the client and not their creditors.
Ryan Brown, 4 Pillars Consulting Group
In a consumer proposal, you make an offer to your creditors to accept a portion of your unsecured debt – secured debt like a mortgage or a car loan is generally not included.
“There are provisions in Canada’s Bankruptcy and Insolvency Act to allow debtors relief from the crushing burden of debt,” says Ryan. “A consumer proposal is a formal legal process. If a majority of the creditors agree with the proposal, it’s binding and they are required to stop collection efforts.”
While it still appears on your credit rating, a consumer proposal doesn’t require you to liquidate your assets like a bankruptcy filing does, and it can be a shorter process than bankruptcy when structured by a skilled consultant.
“Many people start out in a debt management program – which requires you to pay out your debt in full and you often end up paying more than you owe – but the failure rate for those programs is huge. If you are already struggling to pay off your debt load, those payments aren’t likely to be sustainable. After a few years in such a program, you may still end up filing for bankruptcy, which can take up to almost two years to discharge. And then it doesn’t fall off of your credit rating for another six years. That’s a 10- or 11-year process. It’s terrible.”
Who’s got your back?
Also ask how the company is paid, and ask yourself if they will have your best interests in mind as a result. “A bankruptcy trustee represents the creditors and is an officer of the court who has a fiduciary responsibility to the creditors. It’s important to remember that the duties and obligations of bankruptcy trustees are contained in the federal Bankruptcy and Insolvency Act (BIA). A trustee has several statutory obligations under the Act, none of which is to help a consumer get the best possible result when making a consumer proposal or a bankruptcy. The fees are set by a government tariff and they are paid a percentage of what they collect in a consumer proposal,” says Ryan.
“Credit counselling agencies are often funded by the creditors – banks and credit card companies – and the fees for debt management plans aren’t regulated.”
And ask how the company can help to mitigate the damage to your credit rating, help you rebuild it, and help you ensure that you don’t fall into the same financial struggle again.
We have a financial system that is built and sustained by debt and that creates a massive problem. Canadians have almost $2 trillion dollars of debt. We are seeing debt levels that we’ve never seen before. First we need to help you get rid of your problem debt and then we teach you how to use credit properly, what the thresholds are for maintaining a good credit rating, and how not to get back in trouble.
Rebuild your credit
One of the easiest ways to rebuild your credit is with a loan – that seems counter-intuitive if you’re trying to get out of debt, doesn’t it?
“Creditors know that many people will fail to make their payments. When we present a consumer proposal to an insolvency trustee offering a one-time payment versus a regular 60-month payment plan, it’s usually accepted by the creditors even though the payment is a fraction of what’s owed. That’s because they are guaranteed to receive the funds and there is no risk to them on the proposal defaulting,” says Ryan. “We have exclusive access to a fund to make those payments on behalf of our clients, which they then pay back to the loan provider and that loan reports back to Equifax, very quickly reestablishing a credit rating. There is no other company in Canada that can do this.”
Debt can feel overwhelming but with someone in your corner working for you, you can get your financial affairs back on track. And what a relief that will be.
This is a sponsored story paid for by the featured advertiser