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The Differences Between Credit Counsellors, Debt Counselling & Licensed Insolvency Trustees

 

Understanding Your Debt Relief Options: Debt Counselling, Credit Counsellors & Licensed Insolvency Trustees

If you are dealing with a large amount of debt and having difficulty paying it off, it’s easy to feel like there is no solution. Debt can be overwhelming and, when you’re dealing with bills, creditors, and collection agencies, it can seem like there’s no escape. However, the good news is that no matter what your debt situation may be, there are options.

Some of these options include debt counselling services provided by credit counsellors or speaking with Licensed Insolvency Trustees. Each of these options is different and each has its own advantages. Learning about them can help you choose the right one for you.

What is Debt Counselling?

Debt counselling services are offered by credit counsellors. Debt counselling can come in the form of one-on-one consultations as well as through group courses and seminars. The goal of these services is to help people understand budgets and credit so they can create and stick to a budget and use credit wisely.

Some debt counselling sessions also assist people with debt payment strategies. People who go through debt counselling may learn strategies for dealing with debt and for avoiding debt in the future.

What Do Credit Counsellors Offer?

As mentioned, debt counselling services are offered by credit counsellors. In addition to providing information and tips, credit counsellors may also offer a debt consolidation strategy called a debt management plan. This is an informal proposal that credit counsellors make with a person’s creditors.

By agreeing to a debt management plan, you consolidate your debts into one convenient monthly payment. This payment is made to the counsellor who then uses these payments to pay your creditors.

There are certain key points to be aware of when it comes to credit counsellors and debt management plans:

  • A debt management plan is an informal process. This means your creditors do not have to agree to work with the counsellor and they are free to not accept the terms of the plan. If this happens, you will have to pay them separately.
  • Creditors can still use collection agencies to collect money you owe. Credit counsellors can ask them to stop and try to negotiate with the creditor, but they have no legal power that requires them to stop.

You usually have to pay off 100% of the debts you owe. When credit counsellors speak with creditors, they aim to reduce or eliminate interest or extend the time you have to pay your debts. This can make repaying your debt easier.

However, you will likely still need to pay all the debt you owe, even if the creditor agrees to reduce your interest.

LITPro can help you to Reduce Your Debt By Up To 80%

    • You can keep your car, home, and RRSP
    • Stop harassing creditor calls immediately
    • Improve personal cash flow quickly
    • We negotiate your debt and provide a path to financial stability
    • Lowers your payment
    • Works with any level of credit score
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If you are considering credit counsellors, it’s important to choose the right organization. There are both for-profit and not-for-profit credit counsellors. Also, while many credit counsellors have training, they are not legally required to have any specific training. This means it’s important to ask for their qualifications before you agree to work with anyone.

What Do Licensed Insolvency Trustees Offer?

If you are struggling with debt, Licensed Insolvency Trustees are another option that could help. Licensed Insolvency Trustees are licensed by the federal government’s Office of the Superintendent of Bankruptcy to provide information on debt relief and to administer consumer proposals and bankruptcies.

There are certain key points to be aware of when it comes to Licensed Insolvency Trustees, bankruptcies, and consumer proposals:

  • Licensed Insolvency Trustees must hold a Canadian university degree (or equivalent) or have at least five years of relevant work experience in the field of insolvency to become licensed. Members of recognized Canadian professional organizations may also be considered.
  • When applying, a person must demonstrate a solid base of experience and knowledge in the insolvency industry and must complete certain qualification programs.
  • Bankruptcies and consumer proposals are legal processes. This means that, once you file, you receive legal protection from your creditors. They cannot contact you, send collection agencies after you, or take legal action against you. Licensed Insolvency Trustees are responsible for all communication with creditors during these processes.
  • In a bankruptcy, your unsecured debt is eliminated and you are able to start your financial life over. Depending on your situation, you may need to make some payments to the trustee (who will distribute them to your creditors) but you will not be required to pay the full debt you owe.
  • In a consumer proposal, you make an offer to your unsecured creditors to pay a portion of the outstanding debt. If the creditors that are owed the majority of the debt agree to the proposal, all of your unsecured creditors are legally required to accept its terms. This means you will only be responsible for paying some of the debt you owe and the remaining debt will be eliminated.

Most Licensed Insolvency Trustees offer a free consultation where they can review your finances and give you details on the available options.

Resources

Resources & Articles For Managing Your  Finances On Your Own

Insolvency: What Does it Mean & Is It the Same as Bankruptcy?

Insolvency: What Does it Mean and Is It the Same as Bankruptcy? What Does Insolvency Mean? When it comes to financial matters, two words you may have heard are the terms “insolvency” and “bankruptcy.” In fact, it’s a common misconception that...

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