Unlicensed Debt Consultants Cannot File Consumer Proposals

debtor warning unlicensed debt consultants cannot file consumer proposal

Unlicensed Debt Consultants Cannot File Consumer Proposals


Hi Colleen,

I began the proposal process with 4 Pillars in Barrie, Ontario. I gave a 500.00 deposit and soon found that the franchisee was unable to answer simple questions that a trustee would answer and unable to handle my overdue tax returns contrary to promising they would.

I am furious, what should I do? I would offer to be your customer if not for the distance but if you can offer any advice to protect the integrity of your profession, I would really appreciate it. Thanks C


Dear C,

If you have filed a consumer proposal under the Bankruptcy and Insolvency Act, then income taxes are part of the total debts which can be compromised.  I am unclear from your email if you actually ever filed a consumer proposal or not?   I am unsure what the fee of $500 was supposed to cover?  If you pay a fee to someone, make sure you know what the fee is to cover.  Was the $500 fee to chat to a consultant or someone about the process? or was it a fee to be directed to a trustee to file your consumer proposal? Or was it to put together an “informal agreement” with your creditors?  I have had a case here in my office where a “consultant” charged a debtor $500 to assist them in filling out the trustee’s application form.

However, If you have actually filed a consumer proposal, then talk to your trustee directly who can assist you with your questions and concerns.  Please know that all trustee’s offer a FREE initial consultation so if you haven’t had the opportunity to meet one yet, I would encourage you to go for your free interview for your own protection and information gathering purposes.  Clear and accurate information is the key to making sure you are making informed choices.  If you decide that you want to file a consumer proposal, then the trustee will give you forms to fill out.  Once completed,  give these forms back to the Trustee along with any backup documentation requested, who will in turn use this information to  prepare you legal consumer proposal documents.  The application form process is part of what Trustees are required to do, so if you need assistance, your trustee will help you.  If you have yet to see a trustee, then I am unclear as to what the fee is supposed to cover?

It is important to understand the process of filing a consumer proposal.  The initial interview with the trustee is free where your financial options are outlined.  You then make a choice as to how to proceed, if you want go forward with either a bankruptcy or consumer proposal.  If you want to file a consumer proposal, the trustee will outline which information must be provided  to the trustee so that they can prepare the legal forms for you to sign.   Also, the Trustee will outline for you the fees associated with filing a consumer proposal.  Under a the Bankruptcy and Insolvency Act (“BIA”), the fees that a trustee can charge under a consumer proposal include;

 Pursuant to Rule 129 and Rule 131 of the BIA, fees that the trustee can charge include the following;

a) $1,500 prescribed fee;
b) $100 Registration fee,
c) $170 per counseling (upon completion), and
d) 20% of all distributions made to unsecured creditors,

plus applicable taxes to the forgoing.

This is the maximum that any trustee under a consumer proposal can charge.  Generally a portion of this fee is due to the trustee up front to pay for the document preparation.  We generally charge $450 in our office as an initial fee if someone decides that they want to file a consumer proposal.  I understand that there are some “debt consultants” who charge a fee to debtors to help them with the document preparation such as filling out the application form or other matters surrounding consumer proposals, but any fee you pay to a third party will not reduce the fees charged by the trustee.  If you pay someone to help you fill out the application form, you will still have to pay the trustee for their time.   The fee that we charge up front covers all aspect of preparation of the consumer proposal including assisting debtors with filling out the application form, information gathering such as a valuation of assets etc., as well as a detailed discussion outlining all of the documentation, information and legalities of the consumer proposal process.

A licensed trustee in insolvency is the only one licensed in Canada to act as an administrator under a consumer proposal,  which is a formal arrangements with creditors to pay back a portion of a person’s debts.  However, there are many “debt consultants” and “credit counsellors” (as these terms are unregulated and anyone can use them) out there who charge fees for things that are not regulated, so if you run into problems, you have no governing authority to complain to about the process.  From your email it sees as though your paid money for something (perhaps advice), that was unsatisfactory or incomplete from what you expected?  It may be worth your while to complain to whomever you paid the fee to and ask for satisfaction or your money back.  Is that possible?

If you actually dealt with a licensed trustee and not able to get the information that you want from your trustee,  then I would direct you to the Office of the Superintendent of Bankruptcy as they are the federal regulator and issue the licenses to trustees and are one of the governing bodies that oversee  conflicts or complaints.   In Canada most trustees also belong to the Canadian Association of Insolvency and Restructuring Professionals which also oversees trustees code conduct, ethics etc..  And in my case, I am also a Chartered Accountant, as are many other trustees, so there are many formal avenues you can pursue  if someone holds a professional designation.  However, if you dealt with someone that is unlicensed and unregulated, then your only option is to go back to them directly to deal with the issue. (or other legal avenues if you think it is warranted)   If you continue to be unsatisfied, there are consumer agencies in Ontario to which you may be able to turn.  In 2013 strengthened legislation in Ontario was passed (Bill C55) to assist consumers which may be of interest to you.  I attach a link for your review.  http://www.sse.gov.on.ca/mcs/en/Pages/alert_debt_settlement.aspx

Is you decide to proceed with a formal process with a trustee, as part of the consumer proposal process, you will also be asked to complete two counselling sessions with a licensed counsellor under the BIA. These sessions are mandated by the BIA.  The fees for these sessions are also set out above.

At the first counselling session, we cover;

a) money management skills;
b) your shopping and spending habits;
c) consumer warning signs of financial difficulties; and
d) proper use and obtaining and using credit.

The second stage is to determine the budgetary and / or non-budgetary causes of insolvency or bankruptcy and requires that the qualified counsellor:

  1. a) follow-up on the application by the debtor of the principles presented in the first stage to assist the bankrupt and / or relative, or the consumer debtor, to better understand his/her strengths and weaknesses with regards to money management and budgeting skills;

assist, where appropriate, the bankrupt and/or relative, or a consumer debtor:

  1. b) to identify the non-budgetary causes (such as gambling abuse, compulsive behaviour, substance abuse, employment and marital or family difficulties) that may have contributed to his / her financial difficulties;
  2. c) to better understand his / her behaviour in financial management and consumption habits; and,
  3. d) to make him/her aware of the existence of resources that will help him/her achieve and maintain economic stability; and
  4. e) cooperatively with the bankrupt and/or relative, or a consumer debtor, develop recommendations and alternatives for a financial plan of action which, if appropriate, may include referral for specialized counselling to deal with non-budgetary causes of insolvency.

All of the foregoing is covered by the fees outlined under the Bankruptcy and Insolvency Act if you opt for either a consumer proposal or personal bankruptcy.

If you would like to have a chat with a  trustee in your area, I can connect one to you.


Best regards,

Colleen Craig


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