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Consumer Debtor Protection of Canada & What They Do

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How Do Consumer Debtor Protection Companies Work in Canada?

Dealing with debt can be incredibly stressful and one reason why is because often feels like there’s nothing you can do and nowhere you can turn. However, the reality is there are several debt relief options available. The key is to find the right option for you. This can be difficult as every financial situation needs to be handled differently but, by doing research and asking questions, you will be able to determine what’s best for your needs.

One option is to contact a consumer debtor protection company. In Canada, many of these groups exist (such as Consumer Debtor Protection of Canada Ltd). Depending on your financial situation, working with one of these options may be helpful. However, there may also be other options that are better suited to your needs. Understanding exactly what consumer debtor companies offer can help you make the right decision for your circumstances.

Consumer debtor protection companies (also sometimes known as debt consolidation companies, debt relief agencies, credit counselling services, or other similar names) are organizations that work in various ways to make it easier for people to handle their debts.

Some debt relief options available via consumer debtor protection companies and credit counsellors include:

  • Credit Counselling
    • This involves debt counsellors working with people to resolve their debt issues. These sessions can be one-on-one or take place in a group. They are designed to help people understand budgets, credit, and debt, and provide them with strategies for dealing with debt and money problems.
  • Debt Management Plans
    • A debt management plan (DMP) is an informal arrangement between a debtor and their creditors. This is a common way that consumer debtor protection groups attempt to make it easier for people to pay their debts.
    • One way a debt management plan is often done is that the consumer debtor protection agency contacts your creditors and explains your situation. They will often ask the creditor if they are willing to reduce the amount of interest you pay or if they will give you more time to pay your debt (which is lower the size of each monthly payment).
    • Typically, the plan involves consolidating your debts into a single payment. You make one monthly payment to the consumer debtor protection company and this company then distributes the funds to each of your creditors. This simplifies the debt repayment process, which means it becomes much less likely that you will miss a payment.
    • If the counsellor is able to negotiate a lower interest rate with your creditor, that will save you money over the course of the loan.
    • However, with most debt management plans, you are still responsible for paying 100% of what you owe. You may save money on interest and it may become easier to make payments, but you won’t reduce the overall amount of debt you are expected to repay.
    • It’s also important to remember that debt management plans are entirely voluntary for creditors. After speaking with a consumer debtor protection company or credit counsellor, the creditor may realize that agreeing to the plan is the best way for them to receive the money they are owed. However, this decision is up to each individual creditor. If a creditor does not agree to the plan, you will still be responsible for paying them separately.
    • A debt management plan does not protect you from collection action by your creditors. For instance, if a creditor has taken legal steps to freeze your bank account, a counsellor can ask them to stop, but they have no legal power to require that the freeze be lifted.

Consumer Debtor Protection of Canada and Consumer Proposals

A consumer proposal is a legal process that sees you pay a portion of the debt you owe and have the remainder eliminated. If the creditors that are owed the majority of the debt agree to the proposal, it becomes binding for all creditors.

Only Licensed Insolvency Trustees are legally able to administer consumer proposals in Canada. However, many consumer debtor protection companies say that they can assist with these processes.

They may list services such as “government programs to reduce debt” or “consumer proposal referral programs.” What these organizations usually mean is that they offer to provide “assistance” with filing a consumer proposal. Of course, these companies charge a fee for this process. Sometimes this is called a Consumer Proposal Representation Program.

In reality, what often happens is that the consumer debtor protection company charges a fee for a service then has the consumer proposal process administered by a Licensed Insolvency Trustee.

For instance, an organization such as Consumer Debtor Protection of Canada Ltd may start the process of filing a consumer proposal, but they are not able to actually file. Only licensed trustees can file consumer proposals.

Going directly to a trustee instead of working with a consumer debtor protection company can save you money since trustee fees are fixed by the federal government. You should not pay a referral fee to speak with a Licensed Insolvency Trustees. Most trustees can be easily found and contacted online and they offer free consultations without a referral.

In some instances, a consumer debtor protection company may charge a fee for setting up a meeting with a trustee. However, since most trustees offer a free consultation, this fee is unnecessary.

Before you consider working with Consumer Debtor Protection of Canada Ltd or any company, it’s important to review the options that are presented as well as the fees. Doing research in advance can help you avoid situations where you are asked to spend money on something that isn’t required.

Before you work with any debt relief organization, you should ask if they will be referring you to another professional for some services and, if they will, ask if they will charge a fee for that referral. Getting this information will help you make your decision.

Alternatives to Consumer Debtor Protection of Canada Services

If you’re struggling with debt, talking to an organization like Consumer Debtor Protection of Canada Ltd or any similar group could be the right option for you. However, each debt situation is different and, depending on the specifics of your finances, the right option will be different as well. There is no “one size fits all” solution that works for absolutely everyone at all times.

To find the right option for you, you’ll want to make sure you understand all the options that are available, review the pros and cons of each option, then choose how to proceed based on the information you have.

For instance, if you are in a situation where you are having trouble remembering which payments to make and missing payments because of this confusion, consolidating your debt into a single payment may help. If you have several high interest loans and the large amount of interest is making it difficult for you to repay your debt, then speaking with your creditors and asking them if they can reduce the interest may be a good idea. This can be done on your own (you can call up each creditor and negotiate with them individually) or you can work with a consumer debtor protection company. The decision is up to you.

However, in situations where you have more debt than you can afford to repay, reducing the amount of interest may not be enough. If you are unable to meet your financial commitments, considering a consumer proposal or a bankruptcy may be the right option for you.

No matter how you choose to proceed, it’s important to work with a reputable professional that you can trust.

Finding a Reputable Consumer Debtor Protection Company

If you’re dealing with debt, it can be a good idea to work with a professional to resolve your issues. However, the company you work with is important as not all agencies are created equal. Finding someone to work with doesn’t mean just searching for “Consumer Debtor Protection of Canada Ltd” or the name of any other company and picking the first name that comes up. Finding the right organization takes more effort and research.

Many consumer debtor protection companies are reputable organizations that honestly work with debtors and creditors to resolve issues. However, there is little regulation for credit counsellors and debt counsellors. While many credit counsellors and debtor protection professionals have training, there is no legal requirement for them to have any specific training. The amount of experience each person has will differ as well. Therefore, it is important to research the reputation of an agency as well as the specific training of skills of the person you are working with before you agree to anything.

This involves reading reviews from the Better Business Bureau (BBB) as well as other reputable review listings, looking at the specific services that the agency offers, asking questions about these services and the fees associated with them, as well as asking for specifics about the qualifications of the people working at the company. If you talk to an agent or counsellor, ask them about their years of experience, the training they have received, and any other questions you may have.

It’s also a very good idea to find out specifically what services the organization provides, whether they will be referring you to another professional for any of these services, and what you will be charged and when.

Some organizations may make specific claims about success rates. They may promise to reduce your debt by a certain amount and possibly state that you will get a percentage of your money back if their strategies are not successful. These claims require investigation. What sort of strategies will they be using? Are they going to recommend a consumer proposal and, if so, who will be filing the proposal? Remember, a debt management plan does not usually reduce the overall amount you owe and credit counsellors cannot file a consumer proposal. If they do offer consumer proposal services, will they be charging a fee to refer you to a Licensed Insolvency Trustee?

The more you understand about the agency, those who work for the agency, and the services it provides, the greater the likelihood of you choosing to work with an organization that will help you.

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