*Based on a real client – for privacy, some details have been altered.

Meet Sarah

Sarah, an individual based in Ontario, with a penchant for budgeting, regularly created financial plans that seemed foolproof. However, a closer look revealed a common oversight – the importance of tracking daily spending.

The Challenge

Sarah believed she had a handle on her spending, but the reality was quite different. The challenge lay in underestimating the impact of seemingly insignificant daily expenses. Spending – even on simple items like a daily coffee – can quickly add up.

Solution

Spergel, the ‘get rid of debt’ people, stepped in to emphasize the significance of tracking every dollar spent. Advising Sarah to maintain a meticulous record, whether through debit transactions or cash receipts, the goal was to shed light on the often overlooked areas of spending. Although Sarah was confident she knew all the details of her spending, it wasn’t until tracking and creating a paper trail that the lightbulb moment occurred.

Implementation

In the first counselling session with Spergel, Sarah begrudgingly agreed to track her spending for the next few months. What started as a slightly skeptical endeavour turned into a transformative experience. She used a paper trail and recorded each and every single spend – both in debit and cash – to keep a comprehensive record of her daily spending.

Results

After diligently tracking her expenses for three months, Sarah was astonished by the revelations. She identified numerous areas where she was overspending and promptly made adjustments to her lifestyle. When Spergel met Sarah for a second counselling session 3 months later, Sarah revealed that tracking her daily expenses was a lifesaver. She had been diligent with tracking every dollar and realized she was spending a lot more than she ever thought.

By the second counselling session, Sarah had already saved $600 in her savings account from the previous 2 months just by tracking her expenses and cutting back on ‘small’ purchases like coffee and snacks. She was thrilled that she had money set aside for savings, as she’d never been able to do so before.

Conclusion

Sarah’s journey from budgeting confidence to financial awareness showcases the power of detailed spending tracking. Spergel’s approach not only transformed her financial habits but also empowered her to accumulate savings quickly.

Client Testimonial

“In just three months, tracking my spending became a game-changer. I thought I was budgeting well, but the reality was eye-opening. Spergel helped me realize that the ‘small’ purchases were adding up. Thanks to their guidance, I saved $600 in just two months!” 

– Sarah, Ontario

Are you also struggling in Sarah’s situation?

If this feels close to home, there are lots of ways we can help:

• Debt Consolidation and Management
• Budgeting
• Credit Counselling
• Debt Help

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• Jennifer’s Story: Breaking Free – Escaping The Debt Trap With Spergel
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• David’s Story: From Overwhelming Debt to Financial Freedom – A Bankruptcy Success Story
• Chelsey’s Story: From Financial Crisis to Renewed Hope – Overcoming a Husband’s Financial Infidelity
• Mrs. S’s Story: Empathetic Resolution for a Vulnerable Client – Tackling A High Interest Loan
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What is credit counselling in Canada?

In Canada, credit counselling refers to a service provided by non-profit organizations to help individuals manage their debts and improve their financial situations. These organizations offer guidance, education, and resources to individuals facing financial difficulties, often by providing:

1. Debt assessment: counsellors can review your financial situation, including your income, expenses, and debts, to create a comprehensive overview.
2. Budgeting support: counsellors can help to create personalized budgets to manage expenses effectively, prioritize payments, and allocate funds towards debt repayment.
3. Debt management plans: counsellors may negotiate with creditors on your behalf to establish a structured repayment plan. They aim to consolidate debts into one manageable monthly payment with reduced interest rates or waived fees.
4. Financial education: they can provide resources and education about financial management, including understanding credit, budgeting, and responsible borrowing practices to prevent future debt issues.

It is important to note that these services are often provided by non-profit organizations and are intended to assist individuals in regaining control of their finances. They are not loans and typically do not involve lending money. Instead, they focus on financial education, guidance, and support to help individuals make informed decisions and manage their debts effectively.

What if you require more support than credit counselling?

Credit counselling in Canada will not be for everyone. In most cases, you will need to pay a credit counselling fee, repay 100% of your debts, and there is no guarantee of a reduction in your debts – in fact, your creditors are not obliged to work with you on a debt management plan. Other disadvantages of credit counselling in Canada include the fact that it can have a negative impact on your credit score which can impact your ability to borrow new credit, and you may need to pay a fee. If you are in need of a reduction in your debt, credit counselling does not eliminate debt. If you require guidance on managing and repaying your debt, it is a good option, but for more substantial debt relief, options like a consumer proposal or bankruptcy are better as they are legally binding. Consumer proposals can reduce your debt by up to 80%, and bankruptcy can eliminate your unsecured debts entirely. Learn more about the differences between credit counselling and bankruptcy. You should also note that not all credit counselling agencies offer the same quality of service – they are not legally regulated in the same way as Licensed Insolvency Trustees at firms including Spergel. Some might lack expertise or resources, leading to inadequate assistance or advice.

How to find a credit counselling agency

Before engaging in credit counselling, you should make sure to thoroughly research the agency, understand the terms and implications of the program, and consider alternatives to ensure it aligns with your financial goals and needs. Both not-for-profit organizations and for-profit companies offer credit counseling services. Ensure you know the services that they offer, and exactly how much they cost. Here’s a quick checklist of things to check before working with any credit counselling agency:

• Research their reputation – make sure they are in good standing, and that they adhere to standards of practice. You might wish to work with an association like the Canadian Association of Credit Counselling Services to find an appropriate credit counselling agency. Check to see if there have been any serious complaints about the agency via the Better Business Bureau before you engage them.
• Be cautious – unfortunately, debt management scams are prevalent. As credit counselling agencies are not regulated unlike Licensed Insolvency Trustee firms, some will mislead customers in order to make profit. Remember, if it sounds too good to be true, it probably is. Any claims to sell your debt problems quickly for a fraction of your debt are not always possible, as are claims to fix your credit score. They do not have the legal ability to do so, and rebuilding your credit score takes time. Note that you might need to pay fees even if your creditors refuse to negotiate with your credit counsellor.
• Understand the services and costs – the services that credit counselling agencies offer and the fees they charge can vary greatly. You should check the following:
  • the cost of the first consultation is free
  • the services provided
  • whether or not the agency will provide you with a written proposal describing how they will help
  • the type of support the agency will provide to help you improve your money management skills longer term
  • if the agency will provide you with monthly statements of payments
• Check the credit counsellor’s qualifications – unlike Licensed Insolvency Trustees, credit counsellors are not legally required to have any specialized training. Some do, however, so you should check to discover their education, experience, and any specialized training.

What is a debt management plan?

A debt management plan is an informal proposal that credit counsellors often provide to help structure your debt. Sometimes, they might be able to secure a reduction in the overall amount of interest that you pay. Debt management plans allow you to consolidate your debts into a single affordable monthly payment. Do note that unlike consumer proposals, which can reduce your unsecured debts by up to 80%, debt management plans usually require you to repay 100% of your debt. In order to enrol in a debt management plan, you will meet with a credit counsellor who will review your circumstances and help you to create a budget. They might also assist you with money management, and provide tips about handling your debt moving forwards. Once you enrol in a debt management plan, your credit counsellor will contact your creditors on your behalf, to see if they will reduce the interest rate on your debt, and/or if they will extend your repayment period. It is important to note that creditors are under no obligation to comply with a debt management plan, or indeed with credit counselling in Canada. Should your creditors accept, you will make regular payments to your credit counselling agency, who will then distribute your payments to your creditors in line with the plan. Creditors are still able to engage collection agencies to recover the money you owe, and credit counsellors do not have the legal powers required to make them stop.

Things to consider before signing up for a debt management plan

There are a few key considerations you should make before enrolling in a debt management plan:

• The overall cost, and any fees the credit counsellor might charge, including administration or upfront fees.
• Any potential cost saving. While securing a lower interest rate on your debt will save you money, any credit counselling fees might diminish this overall saving and so it is important to compare.
• The types of debt covered. Debt management plans might not cover all your debts. While they can typically cover credit card debts and unsecured loans, they do not usually cover debts like car loan debts or mortgages.
• Your obligations. When following a debt management plan, you need to ensure you disclose all debts, make your payments on time, and do not take on additional credit to avoid having your debt management plan cancelled.
• The terms and conditions. You should carefully review your agreement before signing onto a debt management plan. Ensure you thoroughly understand the costs you will need to pay, and the services you can expect to receive.
• Request regular reports for the duration of any debt management plan, as well as receipts of any transactions involved. Make sure that the credit counselling agency is paying your creditors on time.

What are the alternatives to credit counselling in Canada?

Before you rush into credit counselling in Canada, make sure to compare your options. Each individual’s situation is unique, and by exploring alternatives, you might find a more suitable option. Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief, making them well placed to advise you on your options. Reputable Licensed Insolvency Trustee firms, including Spergel, will offer a free no-obligation consultation to assess your options – you can book your appointment today. Here are some of the most popular alternatives to credit counselling in Canada:

• Consumer proposals – consumer proposals are the only legal form of debt settlement in Canada. Filing a consumer proposal is the process of working with a Licensed Insolvency Trustee to suggest an affordable monthly repayment figure to your creditors. Usually creditors will be happy to receive any figure greater than what they would receive in a bankruptcy, which means often you can reduce your debt by as much as 80%. Consumer proposals have a number of advantages, including the ability to keep your assets, and full protection from your creditors. At Spergel, we have a 99% acceptance rate on any consumer proposals we file.
• Bankruptcy – bankruptcy in Canada is the process of assigning any non-exempt assets you might have over to your Licensed Insolvency Trustee in exchange for the clearance of your unsecured debt. Your assets will then be sold, with any proceeds going towards the repayment of your debt. Bankruptcy is the best pathway to a fresh financial future, and offers full protection from your creditors.

How can I get my debt forgiven in Canada?

Debt forgiveness in Canada isn’t a straightforward process, and in fact, the only Canadian government debt relief program is a consumer proposal. A consumer proposal is a formal, legal debt settlement program available under the Bankruptcy and Insolvency Act. It is a safe, reliable debt relief program that allows you to avoid bankruptcy. Other options that might enable your debt to be reduced include:

• Debt consolidation – combining multiple debts into one with lower interest rates to make repayment more manageable.
• Bankruptcy – while mostly a last resort, it allows for the discharge of most debts but has severe consequences on your credit rating.
• Negotiation with creditors – sometimes, creditors are willing to negotiate partial payments or reduced settlements, especially if you can prove financial hardship.
• Debt forgiveness programs: there are sometimes government grants or non-profit organizations that offer assistance or programs for specific types of debt or circumstances. These can vary based on location and eligibility criteria.
• Seek professional help: Consider consulting a Licensed Insolvency Trustee. They offer tailored advice and guidance based on your specific financial situation, and will likely think of options you might not even be aware of.

Remember, there’s usually no outright ‘debt forgiveness’ without some form of repayment or agreement. It is really important to assess your options carefully, considering both short-term relief and long-term financial implications.

Credit counselling in Canada can support individuals struggling with debt. Before signing up for a debt management plan, it is first important to explore all your debt relief options by speaking to a Licensed Insolvency Trustee. Book a free consultation with an experienced Licensed Insolvency Trustee at Spergel today to take the first step towards a secure financial future.

What to read next

• Credit counselling or bankruptcy – which is best?
• Consumer proposal vs credit counselling: which is best?
• How to get rid of credit card debt
• How to negotiate credit card debt settlement yourself in Canada
• How to get out of debt in Canada

What is a credit counsellor?

A credit counsellor can help if you are struggling to pay back your debt. Consulting a credit counsellor will not affect your credit score, and they can help by offering services including one-on-one credit counselling, sharing tips and courses on topics including how to budget, and offer debt management plans. Credit counsellors are typically found at either a not-for-profit organization, or a for-profit business. It is important to carefully research credit counsellors, and to find an organization you can trust. The business will need to be recognized by a provincial or national association, like Credit Counselling Canada. You can also check if there have been any complaints about the agency including false advertising via the Better Business Bureau. It is important to be cautious, as some credit counselling agencies can claim that they can solve your debt problems quickly for just a small percentage of your debt, or easily fix your credit score. You need to be wary as you may still need to pay fees even if your creditors refuse to participate in negotiations. Once you have elected a credit counsellor, you need to ensure you understand their services and the fee they charge, if applicable. You should check if they will share a proposal of how they can help, or the kind of support they will provide to help you. You may also want to confirm the kind of qualifications or accreditations the credit counsellor has.

What is a debt management plan?

Debt management plans are most often provided by a credit counsellor. A debt management plan is an informal proposal shared by a credit counsellor to your creditors. It is a format of debt consolidation into a single manageable monthly payment, and in some scenarios you may have your interest rate reduced or cleared. Typically, you will need to pay all of your debt without any reduction. When you enrol in a debt management plan, you will meet with your credit counsellor who will review your circumstances, prepare a budget with you, and share some tips about handling your debt. Your credit counsellor will ask your creditors if they would be willing to reduce or clear the interest rate on your debt, or if they will extend the amount of time to make your repayments. It is important to note that a debt management plan is purely voluntary, and creditors do not need to participate in negotiations. If your creditor accepts the terms of the debt management plan, you will make your payments to the credit counselling agency who will then pay your creditors. Creditors are still able, however, to use collection agencies to try to reclaim their money. Before signing up for a debt management plan, you may want to check if the plan would save you money considering the fee. You should also check to see which kinds of debts are covered – are credit card debt and student loan debts covered, for instance? You should also note that enrolling in a debt management plan will also have negative consequences for your credit report.

What is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee is a federally regulated professional that provides debt relief in Canada. Licensed Insolvency Trustees are strictly regulated by governing bodies, including the Office of the Superintendent of Bankruptcy. This regulation ensures that Trustees are qualified and represent the best interests of their clients. They are the only professionals legally able to offer all forms of debt relief to businesses and individuals, including most commonly consumer proposals and bankruptcy. A consumer proposal is a legal form of debt settlement that can reduce your debt by up to 80%. It is the process of formally negotiating a reduction in your debt with your creditors to an affordable monthly payment, which your Licensed Insolvency Trustee will try to achieve on your behalf. One of the key advantages of a consumer proposal is the ability to keep your assets unlike with a bankruptcy, and also protection from your creditors via a stay of proceedings. Filing bankruptcy, on the other hand, is ideal for starting a fresh financial future. It is the process of assigning any non-exempt assets you may have over to a Licensed Insolvency Trustee in exchange for the clearance of your unsecured debts. For many Canadians, it brings huge relief. A Licensed Insolvency Trustee will meet with you initially to review your financial circumstances before recommending a form of debt relief. At Spergel, unlike other bankruptcy firms, you are assigned a dedicated Licensed Insolvency Trustee who will support you each step of the way on your debt relief journey, instead of passing you from person to person. They can assist with all kinds of debt, including credit card debt, student loan debt, and tax debt.

What are the differences between a credit counsellor vs Licensed Insolvency Trustee?

The key difference between a credit counsellor vs Licensed Insolvency Trustee is the legal reinforcement of the forms of debt relief a Licensed Insolvency Trustee is permitted to administer. This means that the forms of debt relief they are able to file are in line with the Canadian government, and all involved parties must conform. A debt management plan formed by a credit counsellor does not have this legal enforcement. Both professionals have important roles that could support different needs for different people. For some, lessons in money management from a credit counsellor could be incredibly helpful, but for others debt reduction or elimination from a Licensed Insolvency Trustee may be what is needed most. In the table below, we outline the key differences between a credit counsellor vs Licensed Insolvency Trustee to help you understand which may be the best option for you.

How do I choose between a credit counsellor vs Licensed Insolvency Trustee?

If you are struggling to decide between a credit counsellor vs Licensed Insolvency Trustee, you should analyze the table above. You may also want to consider the following questions, and the importance of each of these for you.

• Whether or not they provide a free initial consultation
• Whether or not they are federally licensed or regulated
• The amount of your debt that will need to be repaid
• The types of debt you will need to repay
• How long you will be making payments
• How much your monthly payments will be
• What happens if you cannot make a monthly payment
• What happens if your financial situation changes and you need to reduce your payments
• If creditors or collection agencies can continue to contact you
• What happens to your assets
• What happens to your credit report
• How much you will pay in fees
• Whether or not a creditor can change their mind and withdraw from the agreement

At Spergel, our Licensed Insolvency Trustees have been helping Canadians gain debt relief for over thirty years. If you are unsure which to choose between a credit counsellor vs Licensed Insolvency Trustee, book a free consultation with Spergel and we will point you in the right direction. Our Trustees will review your financial circumstances and recommend the ideal pathway for you to achieve financial freedom.