Bankruptcy in Guelph: The Ted Michalos Bankruptcy Guelph Blog

Beware of Debt Consultants

Last weekend I opened one of those coupon flyers – you know the ones, an envelope full of vouchers for different businesses – and there were two different companies advertising that they could “eliminate your interest and reduce your debt to 30% if you call us today…”The procedure they are describing is called a consumer proposal and it may only be prepared and administered by a licensed trustee in bankruptcy. These people are not licensed trustees, they are “debt consultants” who for a fee will refer you to a trustee so that you may file a consumer proposal.

What they won’t tell you is that you don’t need to be referred to a trustee – you may simply use the internet or the phone book to find the number and call a trustee directly.

What’s more, a trustee will discuss all of your options with you, including consumer proposals, bankruptcy, debt management programs and even refinancing your home. There’s no fee for this consultation and if you decide to file a consumer proposal the trustee’s fees are set out by law – there’s no up front fee or hidden costs.

There’s no polite way to say this – there is a growing industry made up of less-than honest people claiming to be “debt consultants”. They will meet with you a couple of times, sign-you up for a debt relief program, take your money, and then refer you to a trustee in bankruptcy; a trustee that would have met with you for free, if you’d gone to them first.

Here are the warning signs to watch for: if you see an ad that claims to be able to reduce your debt to something less than 100% of what you owe, that claims to be able to stop all of the interest charges and that will allow you avoid bankruptcy and the ad isn’t from a licensed trustee in bankruptcy BE CAREFUL. Certainly call them (or contact them on the web), but the first question you should be asking is “are you going to help me set up a consumer proposal?” If the answer is yes then the second question you should be asking is “why should I pay you a fee to help me when I can go see a trustee for the same advice and they won’t charge me a fee?”

Some of these consultants regularly charge in excess of $1,000 – this is money you have to pay them first before they can put their program in place (you have to pay them in full before they will refer you to a trustee).

Before you agree to pay any fees or commit to any program you should contact a licensed trustee in bankruptcy – you’ll discover that referrals are not required and that the fee the consultant wants to charge you is for something your trustee will do for free…

Every week I speak to people that have signed up for these programs and have paid some sort of fee. I have to explain to them that the consultants took advantage of them and charged a fee that they wouldn’t have had to pay had they simply called me first, so call e-mail me or call me today in Guelph at 519-823-0330, and I’ll help you set up a consumer proposal (if that’s the right solution for you) with no up front fee.

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