We’ve all been there…
We see an ad touting a product or service. It sounds too good to be true, yet we want to believe it because it’s something we need.
Debt settlement ads are a good example. Some debt relief companies advertise consumer proposals and other debt settlement programs that can reduce your debt by up to 80% and help you avoid bankruptcy.
Unfortunately, with such companies, you often end up paying for a costly service you don’t need. Here’s why.
In giving advice, the debt consultant offers, for a fee, to be your advocate in negotiating a proposal to your creditors. If you’re feeling anxious about your financial situation and afraid of going bankrupt, such an offer can be appealing.
The problem is, In British Columbia, only a federally regulated licensed insolvency trustee can file the paperwork for, and administer, a consumer proposal. A debt consultant who is offering to be your advocate in this process is often doing little more than gathering information and then referring the file to a trustee.
On top of that, the consultant often charges further unnecessary fees to assist in the administration of your proposal. The result is that you end up, on average, paying thousands more to resolve your debt problem than if you had seen only a trustee.
How to avoid this trap
- Talk to a licensed insolvency trustee first. Trustees have extensive training to gather the required information about your assets, income, and liabilities. They can also propose a workable solution and administer it. A trustee will explain your financial options and help you choose the one that’s right for you.
- If a consumer proposal is your best option, the trustee will help you make a proposal that you can afford and that your creditors are more likely to accept. Trustees understand what creditors want and know which creditors are more difficult to negotiate with.
- Understand who you’re dealing with. There are reputable non-profit credit counselling agencies who can help you understand your debt options. But you should never pay for consumer proposal services to anyone other than a trustee.