People who can help you get out of debt

Credit counsellors help people manage their finances and reduce their debt. They can help you improve your financial habits and put together a plan to pay off your debts. They are trained in personal finance. Many work for non-profit credit counselling agencies, where their services are free or low cost.

A credit counsellor will review your income, assets, expenses and debts. They can help you make a budget to figure out how much money you can afford to put toward paying off your debts each month. 

They can help you understand the options for reducing debt, from negotiating with creditors to consolidating your debts to making a consumer proposal. 

They also help you improve your financial skills, so you avoid getting into debt in the future. They can help you learn to better:

• manage your money

• make financial decisions

• make a budget and stay within it

Credit counsellors also help you take action on some of the ways to reduce debt. For example, they can help set up a debt repayment plan. This is a strategy to lump your monthly debt payments into one big payment. You pay a set monthly amount into an account at the credit counselling agency. The credit counsellor uses this amount to pay your creditors until your debts are paid. 

To develop the debt repayment plan, the credit counsellor will contact your creditors on your behalf and propose a payment schedule based on your ability to pay.  

Under the law in BC, anyone who represents you in negotiations with your creditors must be licensed as a “debt repayment agent." This includes credit counsellors. It also includes “debt settlement companies," explained below. Many of them, sadly, are not looking out for your best interests.

Debt settlement companies are for-profit businesses that will negotiate with your creditors to offer them a sum of money to eliminate (or “settle”) your debts. The lump sum amount is less than your total debt.

Most debt settlement companies work like this: When you sign a contract with the company, they have you make monthly payments to them. The payments are put into an account. When there’s enough money in the account, the company will make their first settlement offers to some of your creditors. 

But here’s the problem. While you’re making payments to the debt settlement company, your creditors get nothing. Some creditors may run out of patience and get a collection agency involved to recover their money. Make sure in advance that your creditors are willing to cooperate with the debt settlement company.

Learn more about how debt settlements work in our page on negotiating a debt settlement.

“While struggling with my debt load, I came across a ‘debt counselor’ who claimed he could knock down my debt by 70%. And I wouldn’t have to declare bankruptcy. Or even lose my credit rating! But something smelled fishy. He’s not a lIcensed insolvency trustee, though he says he works with licensed trustees and can refer me if necessary. What’s got me spooked are the up-front fees — not to a licensed trustee, but to him, to build a 'settlement account' he can then take to my creditors. No timeline was given for this.”

– Samantha, Hope, BC

There’s more to watch out for when seeking help with debt problems. Some companies that offer debt-relief services are trying to scam you. 

Some companies blatantly mislead, saying they “guarantee” they can solve your debt problems by swinging a deal with your creditors so you’ll only have to pay back a fraction of your debt. Such a guarantee isn’t possible. Some creditors refuse to negotiate; others may turn down the settlement proposal. Yet you may still need to pay the debt settlement company their fee. You could end up in even more debt than you were in before.

Some companies may encourage you to take out a high-interest loan to pay off your debts until they can “negotiate a better deal with your creditors." Be aware that some companies make money from fees, set-up costs and interest. You may still be carrying debt after the process is over.

Some companies claim they can quickly and easily fix or “repair” your credit score. It’s impossible to change or erase information that’s part of your credit history, unless information is inaccurate or dated. Improving your credit score takes time. (Learn how to improve your credit score with good habits.)  

Watch out for debt-relief companies that do any of the following:

• use high-pressure sales tactics

• make unrealistic promises

• charge excessive fees

• delay payments to creditors

A licensed insolvency trustee provides advice to people and businesses about getting out of debt. Trustees are professionals regulated by the government office that oversees bankruptcies.  

You must see a licensed trustee to make a consumer proposal or declare bankruptcy. These are formal, legally binding processes that allow you to get out of debt.  

A trustee can help you decide on a strategy to get out of debt. Depending on your financial situation, they may suggest selling some of your assets, consolidating your debts, making a proposal to your creditors, or declaring bankruptcy. 

Usually, the first meeting with a licensed insolvency trustee is free. If you go to the next step and have them make a consumer proposal or declare bankruptcy, you’ll need to pay them. The fees trustees can charge are regulated by the federal government.

To find a licensed insolvency trustee in your area, search this database. When you meet with a trustee, make sure to bring as much information about your finances as possible. For example, bring any credit card statements, loan documents, or mortgage records.