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Credit Counsellor vs. Trustee in Bankruptcy
You’re struggling to pay your debts and you need some help; who do you go to for advice? Both Trustees in Bankruptcy and Credit Counsellors offer financial advice and debt solutions options so what is the difference between the two?
Credit Counsellors offer help creating a debt management plan. They will help you create a monthly budget and work out how much money you can afford to pay into your debts. They will contact your creditors and negotiate a payment plan with them that works for you; often they can get your interest rates reduced, but you still pay the total amount of your debt over time. While a Credit Counsellor has the power to negotiate on your behalf they cannot bind any of your creditors against their will. This means that if any of your creditors refuses to accept the plan proposed by your Counsellor they can continue to try and collect from you, and there is no way to stop them.
Credit Counsellors are not regulated and as such almost anyone with any level of training can set themselves up as a Credit Counsellor. It also means there is no regulation of the fees they charge for their services. There are many honest and knowledgeable Credit Counsellors out there, but there are also a lot of people with no experience who will charge you too much. If you decide to go with a counsellor, do some research. Ask them for their credentials and compare their rates to others in your area. Also be wary of no-for-profit credit counselling agencies, they are often funded by banks and credit card providers and may not give you the best advice for you.
Trustees in Bankruptcy also help you create an affordable payment plan, which is called a consumer proposal. Consumer proposals are a formal, legally binding document draughted by your Trustee and presented to your creditors. If more than half of them (by dollar value of debt) agree to the proposal ALL of your creditors are bound, and once a Trustee sets your proposal in motion none of your creditors are allowed to contact you, but instead must deal directly with the Trustee. A Trustee can also negotiate a proposal that results in you paying less than the full amount of your debt.
The profession of Trustee is highly regulated. It requires specific education and a license form the Superintendent of Bankruptcy. All of the Trustee’s powers are set out in the Bankruptcy and Insolvency Act, and because of this they have powers that a Credit Counsellor doesn’t. That is how they can bind creditors and how they can negotiate for repayment of only a portion of your debt. The fees they can charge are also highly regulated, so you will be paying pretty much similar process no matter which trustee you go to.
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