Have you seen any of the ads touting “Government of Canada Debt Relief Programs with promises to reduce your debt by 60, 70, even 80%?” The businesses running these ads are trying to sell you “consulting services” – they’ve “been there before,” they know the “tricks of the trade,” they “know a guy…” Please tell me you are not falling for any of this.
The Government of Canada is not in the debt reduction business. They never have been. They never will be.
Governments create laws and establish rules and regulations to administer those laws. In some cases, they licence people pursuant to these laws to deal with very specific aspects of the law. The law most applicable to debt reduction in Canada is called the Bankruptcy and Insolvency Act. The people licensed to administer procedures pursuant to this law are trustees in bankruptcy.
In my opinion, it is quite a stretch to call a consumer proposal filed in accordance with the Bankruptcy and Insolvency Act as a “government debt relief program”. A consumer proposal may very well reduce your debt by 70%, but it is an arrangement made between yourself and the people you owe. The government’s role was to create the laws and licence the trustee that must administer the proposal on your behalf. None of these other consultants have a valid role. They are simply taking advantage of the fact that the average Canadian is unfamiliar with our insolvency laws.
It certainly sounds better to say “government relief program” than to tell someone they need to see a bankruptcy trustee. There are trustees now referring to themselves as “officers of the Court,” rather than use the title trustee. The name is not incorrect, trustees are officers of the Court, restricted to the administration of insolvency related matters. Trustees are not lawyers – they cannot deal with matters beyond insolvency. “Officers of the Court” is simply a softer sell to the public.
Why should you care about this? First, if you find yourself in financial trouble you want to know who you can turn to in order to resolve your problems. The last thing anyone needs is to pay extra consulting fees when money is already tight. Second, it causes confusion in the marketplace. Debt consultants, credit counsellors, Officers of the Court, proposal administrators, bankruptcy trustees. Which of these are legitimate? Which are scammers? How do you figure it out?
The best advice we can give is to ask some very simple questions to whomever you are thinking about dealing with:
- Is the solution to my financial problems a consumer proposal?
- Are you a licensed trustee (the only people permitted by law to file a consumer proposal)?
- If you are not a licensed trustee, why am I paying you a fee?
You should also know, if you are dealing with a licensed trustee then they should not be requiring you to pay any fees before you actually file the consumer proposal. In addition, any fees you pay when you file should be applied directly to the cost of filing the proposal – trustees are not entitled to “consulting fees” before you file. All of your payments are to be applied to your proposal – that’s the law.