Consumer Proposal – Is my debt consultant ripping me off?

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Debt Freedom – Consumer Proposal

The following question was asked via

Email: [email]
Subject: Debt Settlement, am I being ripped off?
Hi there…I have been having a law firm as a debt consultant to settle two credit card debts for me and have been making monthly payments for a few years now. They have paid one creditor off and are now telling me that the second creditor refuses to settle….and that this will require me to pay an additional $7000. The original debt was $7000 but is now up to $11,000 with all the fees that have been added on. Something just doesn’t feel right and I am reluctant to go ahead with this. I am looking for a second opinion and am wondering if you might be able to help me.  Do you think that they are ripping me off?


On Wed, Jan 6, 2016 at 4:35 PM, Colleen Craig <> wrote:
Regarding debt settlement, there are many players in the “debt consulting” market – lawyers, debt poolers, debt consultants etc. In BC some debt poolers require a license to hold 3 party funds (if there is a debt settlement amounts collected) but generally others do not have specific skills, training, education or the power of legislation behind what they do. A lawyer who is “settling” debt for you (as well as other so called debt consultants) would not be acting under specific “debt” legislation (either provincial or federal) that could bind or force a creditor to settle, but rather simply relying on their own skills as a negotiator acting on your behalf (essentially just doing what you could have done for yourself). If you have been making payments to the lawyer for a few years, you should review your contract with the lawyer to see what exactly you have been paying and where the payments have been directed.

So, based on the fact that the lawyer is not acting under specific debt legislation, the answer is, yes, if your creditor will not “settle” your creditors are completely within their rights to sue you, then garnish your wages, seize your assets, report negatively to the credit bureau etc. I hope that you did not pay the lawyer any upfront fees before they accomplished a settlement?

Can you manage the payment of the $11,000? Or, can you enter into a payment plan with your creditor that you can afford? Hopefully you can manage some arrangement and not have to pay the lawyer fee on top of having to pay your creditor back in full and continue to pay the ongoing interest as well.

If you think that a binding proposal would be of interest to you, we do offer a free consultation to go over your situation. A consumer proposal is a plan which your creditor will also have to agree to, but at least it could stop the interest. You could also consider personal bankruptcy but that may be your last alternative given that you have settled with the other creditors so far. However, it continues to be an option for you so you always know that there is a way out if needed.

Once again, we would be happy to sit down with you to discuss.

Kind regards,

Colleen Craig, CPA-CA, CIRP
Solving Your Debt Puzzle


Hi Colleen…thanks for getting back to me and taking the time to explain things. In hindsight, I should not have gone this route.

I have requested the numbers from the law firm, to see what I have paid to date, and where it has been directed. I am still waiting on this information.

I am reluctant to have to pay the entire $11,000 at this point, after making monthly payments to the lawyer for so long. They are now telling me that if I pay them an additional $7000, they will do a “debt dismissal?”

I would be interested in learning more about the Consumer Proposal. I had done one in the past, to reduce some debt that I had. This might be a better option for me. It’s my understanding that if I went this route, it would significantly reduce the amount owing? Is that correct?

Thanks again for your help,


Dear XXX

I have no idea what a “debt dismissal” would be?  Seems somewhat dodgy.  I would ask for a detailed accounting before I paid out any more money if I were you, or better yet, call your creditor directly and see what they have to say.  If they have no intention of settling, then you will know right away your so called debt consultant is not telling you the truth.   If they are really lawyers, you could always complain to the law society of their particular province.  I can guarantee that they are not Insolvency Trustee’s because in Canada lawyers cannot act as Licensed Insolvency Trustees.

If you would like to have a discussion with our office to discuss a consumer proposal, we offer a free consultation where we can outline your legal options under the federal legislation called the Bankruptcy and Insolvency Act which governs consumer proposals and personal bankruptcy.   If you want to do either of these two options, you must talk to an Insolvency Trustee.


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