Colleen Craig, as a Licensed Insolvency Trustee (formerly a Trustee in Bankruptcy) , can walk you through a monthly budgeting process to help you take control over your finances. Prior to making a decision as to how to proceed, Colleen and her staff will sit down with you for a free credit counseling sessions and consultation and review your monthly family budget. Once prepared, your budget will help the Trustee outline your options. Bankruptcy might not be the right solution for everyone and Colleen can help outline alternatives that can work for you such as a Consumer Proposal. Credit Counselling is part of any insolvency service provided by Colleen Craig based on her years of experience in Victoria and her qualifications as a licensed BIA (Bankruptcy and Insolvency Act) Insolvency Counsellor.
Credit Counsellors other than a Trustee
Credit Counselling is a general term and anyone who wants to use the title. In British Columbia there are NO provincially run or subsidized programs specifically for credit counseling. Everyone that helps you with your debt does so for a fee. If your debt is less than $10,000 and you have some ability to pay down your debts each month, then the Credit Counselling Society of BC is a great place to turn to to help your reduce to debt levels. They can assist you in negotiating with your creditors to reduce the interest charged and help you with a repayment plan based on your ability to pay. However, they cannot help you with CRA tax debt or assist you if you cannot pay back the principle of the debt back in full over a reasonable period of time (i.e. 5 years)
Debt Consultant, or Credit Counsellors – “For Profit”
Generally these agencies act as the”middle man” with your creditors. Over time these agencies have developed relationships with some of the major credit granters, which allows them to offer reduced interest on your debts or sometimes reduced payments. Some of these agencies allow you to make one payment to them and they will funnel these payments to your creditors once they have deducted their fees. The amount of fees charged, the reporting that is done to you, is now governed by the BC Legislation regarding Credit Counsellors) brought into force in April 2016. This legislation is intended to help ensure debtors are treated fairly.
However, this legislation will not cover those individuals and agencies who have now begun to call themselves “Debt Consultants”. They give your “advice” regarding your debts while charging significant up front fees. Once they have taken their fees, they simply refer you to a Licensed Insolvency Trustee to prepare a Consumer Proposal.
Let’s go through a small example.
Say you have $50,000 in consumer debt (credit cards, lines of credit, overdraft, an old student loan and some CRA tax debt) You make $2300 per month and live alone. All of your assets are considered “exempt” under the Court Order Enforcement Act. You can afford to pay $300 each month to your debts after your personal monthly expenses but this is not enough to reduce the principle amount of the debt because of ongoing interest charges, so your debt is ever increasing.
Option A: Go to a debt consultant. They will discuss some options. They usually charge a fee for their services of, lets assume, $3,000. They may negotiate with your creditors for lower interest rates, but, each debt consultant is different. They may discuss a Consumer Proposal through a Licensed Insolvency Trustee (a different firm). But this also depends on the individual debt consultant. They may even help you prepare the Consumer Proposal forms and go with you to the Trustee’s offices. You offer $300 per month for 45 months through the Trustee. (Total of $13.500) It is accepted by your creditors. You pay the $13,500 to the Trustee over the 45 months, the balance of the debt is discharged. You have paid a total of $16,500
Option B/C: Go Directly to a Licensed Insolvency Trustee. As a LIT I would discuss all options with you including, negotiating directly with your creditors, filing a bankruptcy (option C) or filing a Consumer Proposal (Option B). Everything else stays the same. You always have the option of filing for bankruptcy, however, after discussions with the trustee you opt for a Consumer Proposal of $300 per month for 45 months. Your offer is accepted by the creditors. IF you go directly to the us as your Trustee, you will have paid $13,500 if you choose a Consumer Proposal, and $1,750 if you choose a personal bankruptcy.
|(**)||Option A||Option B (Proposal)||Option C (bankruptcy)|
|Up Front Debt Consultant Fee||$ 3,000||NIL||$ 150|
|Proposal Payment||$ 13,500||$ 13,500 (*)|
|Total Paid By YOU||$ 16,500||$ 13,500|
|Payments OUT to:|
|Trustee Fee||$ 4,100||$ 4,100||$ 1,600|
|Government Fee/tax||$ 660||$ 660|
|To Creditors/Dividend||$ 8,741||$ 8,741|
|Total Paid by You||$ 16,500||$ 13,500||$ 1,750|
(*) Our upfront fees, generally $450, form part of your offer to creditors
(**) all costs are approximate based on assumptions given
The foregoing is based on numerous assumption and it is important to remember that each person’s individual circumstances will vary. Please contact a Licensed Insolvency Trustee to discuss your personal situation.
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