Is Canada debt relief legitimate?

Posted on 20 December 2022

Written by Alan Spergel

Gaining debt relief is a big step for many Canadians, and essential for some. Taking this step, however, does need to come with some caution. Unfortunately, there are a number of fraudulent companies and scams out there that may have you wondering ‘is Canada debt relief legitimate?’ If you are desperate you get out of debt, many disreputable companies will try to prey on you, so it is important to know who and what you can trust. In this article, we explore legitimate forms of debt relief, as well as how to avoid debt relief company scams in Canada. No matter how bad you think your financial situation may be, there is always a legitimate solution for your debt. Licensed Insolvency Trustees are the only professionals legally able to file all forms of debt relief in Canada. At Spergel, our experienced Licensed Insolvency Trustees are here to help you.

How do you spot a debt relief scam?

There are several key signals that may indicate a debt relief scam:

  • They ask you to pay fees upfront before your money is used to settle your debts, without guaranteeing what their fee will achieve
  • They make grand promises without truly understanding your financial situation, like telling you they can influence your creditors or erase your bad credit – the reality is they probably cannot guarantee such things
  • They tell you to break contact with your creditors
  • They tell you they can clear your tax debt – the CRA will not agree to informal debt relief; only consumer proposals or bankruptcy
  • They tell you they can stop collection calls – once again, only a stay of proceedings triggered by either a consumer proposal or bankruptcy will stop calls

Often, when something sounds too good to be true, it probably is.

What should you do if provided with a debt settlement agreement?

If a debt settlement company shares a debt settlement agreement with you, you should ensure you read and review the document carefully. Pay particular attention to the payment schedule, and how it is broken down. Are there additional fees for the debt settlement company? Do you need to pay towards their fees first of all, before settling your debts? Reputable debt settlement or credit counselling companies will not generally require their fees to be paid upfront before delivering a service – they will be structured across the payment schedule. If, for instance, there is a period over which you are not paying off your credit cards, it will have a negative impact on your credit score which can last for years. Not paying your bills for a period of time can also frustrate your creditors, who may wish to collect or pursue legal action like a wage garnishment or freezing your bank account. For this reason, no payment schedule should advise a break in making payments to your creditors. Anything that does is a red flag. The key to having your creditors working with you when you are facing financial difficulty is keeping strong lines of communication. Refusing to pay or speak to them will not gain their cooperation.

How to choose an honest debt relief agency

Thankfully you have various options when it comes to gaining debt relief, however, you should always do your due diligence and research the company before agreeing to anything. The safest option is to speak to a Licensed Insolvency Trustee, the only professionals in Canada legally able to file all forms of debt relief. As they are legally qualified, you will have no need to ask ‘is Canada debt relief legitimate?’ Non-profit credit counsellors can also offer helpful advice on money management and credit counselling, although they will not be able to reduce or clear your debt. Licensed Insolvency Trustees are a good first port of call, and can review your financial circumstances before recommending a pathway for financial freedom. They must stick to a strict code of ethics, and have government regulated fees for their work so you do not need to worry about legitimacy or unreasonable fees. At Spergel, we offer a free initial consultation. Popular forms of debt relief include a consumer proposal, a bankruptcy alternative that can reduce your debt by up to 80% while enabling you to keep your assets. Bankruptcy, on the other hand, can clear all your debt for those facing financial difficulty with perhaps less to lose.

Debt relief options you can trust

Most Canadians with debt issues fall into one of the following categories. The earlier you reach out to a Licensed Insolvency Trustee, the more debt relief options you will have:

Your finances could be in a better shape, and you would like some advice

In this scenario, you may not be in a problematic situation, but your finances could become difficult if you do not act. A Licensed Insolvency Trustee can support you in this situation and you may be able to avoid more serious forms of debt relief, like bankruptcy. Your trustee can help you learn how to budget, seek out a debt consolidation loan, and even gain advice on how get debt forgiveness from unsecured creditors.

Your finances are spiralling out of control

A Licensed Insolvency Trustee can offer advice on having a manageable payment plan in place to reduce your debts, or considering a consumer proposal. Consumer proposals can reduce your unsecured debts by up to 80%, and at Spergel our consumer proposals have a 99% acceptance rate. Consumer proposals are reinforced by the Bankruptcy and Insolvency Act and are therefore completely legal and legitimate.

You are seriously struggling financially

When facing serious financial difficulty, bankruptcy may be the only option. If you are a homeowner in trouble, you can be at risk of losing the equity in your home, and so the sooner this scenario is addressed, the better. When you are struggling financially, you do not need more stress from questions like ‘is Canada debt relief legitimate?’ Instead, ensure you are speaking to qualified experts in a Licensed Insolvency Trustee. They can offer debt relief solutions to suit your needs.

If you are wondering ‘is Canada debt relief legitimate?’, book a free consultation with Spergel. Our team of reputable Licensed Insolvency Trustees can help to eliminate the stress and anxiety of your financial problems. We will develop a roadmap for your financial circumstances, and help you on the journey to a fresh financial future. Reach out today – you owe it to yourself.

Alan Spergel

Alan Spergel

Alan Spergel is the founder and President of Spergel. A leader in our industry, he is also a former chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) and has served on Canada's Superintendent of Bankruptcy Management Board. He actively supports multiple charities, ensuring that Spergel gives back to our communities and has recently been appointed as Chairman of the Board of the Humber River Hospital Foundation. Outside of the boardroom, you can find Alan playing golf, tennis, or skiing and enjoying quality time with his grandchildren.

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