Other Alternatives

What is credit/debt counselling?

The true description of Credit/Budget counselling – it is commonly a process that is used to help individual debtors with debt settlement through education, budgeting and using a variety of tools with the goal to reduce and, ultimately, eliminate debt. It is highly unlikely that a company would sit down with you, review your monthly expenses, and tell you where to spend your money.  The costs associated with this alternative would be astronomical to someone in financial difficulty. In addition, if an individual you barely knew told you where you could/should spend your money, most people would be offended.  They would likely tell you things like stop smoking, live in a smaller apartment, spend less on food, etc.  What they are doing is expressing their spending priorities on you. Everyone has different priorities and different sacrifices they are willing to make to reach their own priorities. They may or may not be at a different stage of life than you.

Credit Counsellors/Debt Repayment Agents

The majority of companies that advertise that they are “credit counsellors” and offer credit counselling services, are Debt Repayment Agents licensed under the British Columbia Business Practices and Consumer Protection Act.   These companies sometimes advertise that they are non-profit societies – they are still registered debt repayment agents.  Their license allows them the ability to accept payment from you for distribution to more than one creditor.  Think of these firms as reverse collection agents.  You hire them to negotiate a settlement with your creditors.  Yes, there are fees involved, whether they are not-for-profit or for profit.  Further, be aware that if the contract you sign with a debt repayment agent does not include the following statement:

“Debt repayment agents operating in British Columbia are required to be licensed under the Business Practices and Consumer Protection Act and are regulated under that Act. The services of a debt repayment agent are not provided on behalf of, or in affiliation with, the Province of British Columbia or the Business Practices and Consumer Protection Authority, commonly known and doing business as Consumer Protection BC. Using the service of a debt repayment agent will not necessarily improve your credit rating, deter the efforts of a creditor to collect a debt or prevent legal action to recover the debt, including garnishment of your wages. For more information on the regulation of debt repayment agents, please contact Consumer Protection BC.”

They are not licensed debt repayment agents.  You may also check if a debt repayment agent license is valid here https://www.consumerprotectionbc.ca/check-a-licence-search/.

Debt Repayment Agents do not offer a formal process.  Your creditors are not legally bound by the process and can sue you or continue lawsuits at any time.  There is no stay of proceedings as in a Bankruptcy or a Consumer Proposal.  Should a creditor not agree, or changes their mind, they are not bound by the process.  Should your situation change, they could ask for more money or larger payments at any time.  We have been advised that Government Agencies (Canada Revenue Agency) will not, under any circumstance, agree to this process.  Even if all your other creditors agree, Canada Revenue Agency can and will garnish your wages, stopping you from living up your payments to the debt repayment agent.  What documentation will you receive at the end of the process stating that you no longer owe the creditor money?  In a Bankruptcy or a Consumer Proposal you receive a Court Order stating your debt has been discharged.

Debt Management Firms

Over the last 10 or so years, companies have been popping up and advertising their services as debt management firms.  They typically advertise that they work for you, not your creditors, or that their solution will help you get out of debt faster.  We define these firms as those that do not have the qualifications to be licensed under Federal Legislation (Bankruptcy and Insolvency Act) and have either chosen not to or cannot be licensed under Provincial Legislation.  Debt management firms cannot offer a formal process (Bankruptcy or Consumer Proposal) and they are not licensed to negotiate with the creditors on your behalf under Provincial Legislation.  The fact that they are not licensed means that they typically are not regulated and do not have to answer to any legal authority.

Orderly Payment of Debts

This process is currently not available in British Columbia.

Debt Consolidation Loan

This alternative is offered by your bank or financial institution.  This is where a debtor arranges for a new loan through a bank or financial institution, paying off a number of small debts into one large debt.  Typically, the bank would ask for a co-signer to secure the loan, or may be able to secure that loan with assets that they deem to be worthy of securing or guaranteeing the loan.  If you are looking into this alternative, be careful of the interest rates being offered by the financial institution.  We have seen consolidation loans at over 33% interest, and sometimes they consolidate credit cards that are charging less interest than the loan being offered.  If you qualify for this type of loan, be aware that you could be paying more than if you did not take the loan.  The rule of thumb is, if you cannot get your consolidation loan at your bank/credit union, you cannot get a loan and you should be looking at different alternatives.

Book a Free Consultation

We want to help you to get out of debt. Don’t hesitate to contact us if you would like to learn more about bankruptcy alternatives like debt consolidation in Kelowna, Kamloops or Penticton. Contact us today for more information.