Douglas Hoyes, Bankruptcy Canada Trustee
Credit counsellors are in the news a lot these days. The Toronto Star reported that Canada’s largest not for profit credit counselling agency, Consolidated Credit Counseling Services of Canada operates without certified counsellors. In the story they question whether or not an un-certified counsellor can give qualified advice. I posted my complete thoughts on the issue in a post on Consolidated Credit Counseling Services and their operations, and I suggest you do your own research to determine if the fact that Consolidated Credit Counseling Services of Canada has credit counsellors that are not certified is an issue for you.
The Star followed up with Are your debts out of control? where they quote a well known financial expert:
Gail Vaz-Oxlade, author and host of Til Debt Do Us Part and Princess, used to recommend credit counseling services to consumers in financial trouble, but no longer does.
“I know that there are some credit counseling people who are fabulous at their job. In fact, I have one who writes for me on my website, but to a large extent, not only are they untrained, but credit counseling gets most of it’s funding from the credit industry,” she told the Star on a stop on the tour for her new book.
As a bankruptcy trustee in Canada, what’s my opinion?
I believe that there are good and not-so-good people in all professions. Some doctors are better than others; some credit counsellors are better than others. The trick, of course, is to find the good ones.
My firm, Hoyes, Michalos & Associates Inc., based in Ontario, works with a number of not for profit credit counselling agencies, and we have for many years. I can give you a list of counsellors that I have personally worked with for many years who are very knowledgeable, and who work hard and care deeply about their clients. They always strive to give the best possible advice.
However, I also hear stories about credit counsellors, even not-for-profit credit counsellors, who didn’t take the time to fully understand a person’s situation, and gave bad advice. I’ve also heard stories about trustees that didn’t give great advice.
What can you do to protect yourself?
Here are my top four tips for finding an adviser when you are in financial trouble:
First, analyze your situation yourself. Make a list of your debts, and make a household budget. With your numbers in front of you, it may be possible to solve your problems on your own. When you see what you spend each month you may be able to cut expenses and use the savings to pay off your debts on your own.
Second, if you do need expert help, do your research before you book a meeting with a credit counsellor, debt consultant, or bankruptcy trustee. Go to their website and research their qualifications and understand their services.
Third, when you talk to the expert on the phone or meet with them in person, ask them for their qualifications. How long have they done this kind of work? Who are they regulated by? What licenses or accreditation do they have? Someone who took a two hour on-line course and just started in the business yesterday is not as qualified as someone with many years experience and lots of education.
Fourth, ask for a list of all of your options. This is the most important item on the list, and here’s why: we are all biased. If you go to a credit counsellor, they are likely to recommend a debt management plan. If you talk to a bankruptcy trustee, they are likely to recommend bankruptcy. That’s how we get paid, so we want to sell our services. A truly great adviser will explain all of your options, including:
- working it out on your own;
- getting a debt consolidation loan or refinancing;
- doing a debt settlement;
- doing a debt management plan through a not for profit credit counsellor;
- filing a consumer proposal, or
- filing bankruptcy.
If you meet with a bankruptcy trustee and all they talk about is bankruptcy, leave the office! If you meet with a credit counsellor and all they mention is a debt management plan, leave the office! You can only make a fully informed decision if you understand all of your options.
Here’s the truth: all of the options listed above are good options for certain people in certain situations, but there is no “one size fits all” solution.
- If your debts are manageable and you have the self discipline to make a budget and cut your expenses, that’s the best solution.
- If you have equity in your house and a good income, and you can afford to refinance, a debt consolidation loan or second mortgage may be the best option for you.
- If your debts are old, and you have access to a lump sum of money, it may be possible to negotiate a debt settlement with your creditors.
- If you can pay your debts in full but you just need some time and a break on the interest, a debt management plan through a not for profit credit counsellor is a viable solution.
- If you can repay a portion of your debts, but not the full amount, a consumer proposal may be your best option.
- Only after considering all other options should you consider filing bankruptcy in Canada.
So what’s the difference between a credit counsellor and a bankruptcy trustee?
In some cases they will both go through your full list of options, so from that point of view they are both good advisors.
However, as the Toronto Star article points out, there is no guarantee that you are dealing with an accredited credit counsellor who will explain all of your options.
A bankruptcy trustee is licensed by the federal government, and we are required by law to fully assess your situation, and explain all options. (You can read the federal government Directive that requires us to fully assess your situation and explain all options). We are also required to follow a Code of Ethics.
Are all trustees perfect advisers Are all credit counsellors un-informed? Of course not. There are good and bad people in every profession, so follow my four tips to protect yourself, and find the best adviser to help you deal with your debts.