6 ways to avoid Debt Settlement Co. Scams and Tricks

  1. They claim to be legal

Make sure the company you have chosen to help you deal with your debt is legally allowed to operate in Canada. Most American for profit Debt Settlement companies are not licensed to provide services in Canada. Be very careful if they try to make settlement arrangements for you without ever touching your money; this is one way they avoid legislation for dealing with Canadian clients. It is always best to find a local, federally licensed trustee. Someone you can trust and feel comfortable with, not a large, cold Corporation and especially not one located in a different country.

  1. They Claim a successful track record

Anyone can negotiate a debt settlement with creditors, even you. The question is, how many will you be successful with? Many Debt Settlement companies are successful with negotiating a few of their client’s debts, but not all. Even if they claim to have negotiated numerous debts over a long period of time does not mean they are successful for their clients. What does a successful client look like? Well to us a successful client needs legitimate help with their debt(s). Next, we include ALL of their debts with all of their creditors all across the world not just a few. Last, we help our clients to rehabilitate and manage their money and finances better than when they first came in to see us through our credit counselling sessions included for every client.

  1. They claim to be government approved

In Canada, only a Federally Licensed bankruptcy trustee has the legislative authority to deal with certain debts such as Student Loans and CRA debt within the Bankruptcy and Insolvency Act. Some companies can offer some reprieve on the interest amounts owed, but not the principal.  Anyone can hold themselves out to be a Debt Consultant after paying a simple franchise fee but do not confuse those companies with a legitimate Bankruptcy Trustee.

  1. They negotiate Debt Settlements

What debt settlement companies do is attempt to negotiate with your creditors before they take you to court. They can also make suggestion like having you write letters to all your creditors to request they only contact you in writing. With a Bankruptcy Trustee there is a stay of proceedings in place in where your creditors may not legally contact you in any way. Debt Settlement companies also don’t tell you that legally even if they have negotiated a settlement for you, a creditor can come back and pursue you for the whole amount of the debt. Creditors are not legally required to stop collection upon a debt settlement agreement; with a Bankruptcy Trustee they are legally bound to accept only amounts collected dispersed to each creditor after the completion of a bankruptcy or consumer proposal.

  1. They collect Debt settlement fees prematurely

Another problem with some debt settlement companies is that you have almost no recourse if things go wrong. Make sure you read the debt settlement agreement very carefully before you pay them any fees and look for guarantees of service. It is always helpful to have ILA (independent legal advice) on any signed agreement you are considering entering into. Also, check your provinces’ consumer protection office to see if a specific company is licensed to provide service in your area.

  1. Check their reputation

You can check with the Better Business Bureau for the company’s rating but not all companies are listed here even if they are reputable. I would suggest using Google to search the companies and checking their websites for reviews or testimonials from current or former clients. Check out their Social Media pages and see if it feels comfortable to you or alternatively feels like a cold, hard uncaring corporation who is only out to make a buck and really doesn’t care about your financial well being. Use Google Maps to check out their office to ensure they actually have one in your city. 65% of people who pay fees to some debt settlement companies never receive a single debt settlement. The best way to be sure about dealing with your debt in the most effective way is to find a federally licensed Bankruptcy Trustee in your area. This way you can’t go wrong.

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