Managing Debt in B.C.
May 04, 2012

There are several ways to help reduce or manage your debt. The most common ways consumers approach managing their debt are: 1. Credit Counselling, 2. Debt Pooling, and 3. Debt Settlement.

1. Credit Counselling
Credit counselors may not accept your money to pay your creditors on your behalf. Their services are restricted to credit counseling and sometimes negotiations with your creditors. Credit counselling organizations do not require licensing in British Columbia.

2.Debt Pooling
Under the law in BC, a debt pooler is a person who accepts and distributes your money to your creditors in accordance with an agreed upon repayment program. This activity is what triggers the requirement to be licensed with Consumer Protection BC. The law seeks to safeguard consumer money through the use of trust accounts and the requirement of security.

Fees will vary but usually include some or all of the following;

a. onetime set-up or administration fee;
b. monthly fee that is a percentage of the amount paid to your creditors;
c. fee for each cheque sent to creditors on your behalf;
d. fee for a printed accounting of your debt management program.

To find out if a company is licensed or requires licensing, contact Consumer Protection BC at 1-888-564-9963 or www.consumerprotectionbc.ca.

3.Debt Settlement
Debt settlement companies offer to help reduce monthly payments and settle your debts, but often require an upfront fee.

It's important to understand the implications of debt settlement and the track record of the company before entering into any agreement to negotiate your debt. A proposal from a debt settlement company will not relieve you from your legal responsibilities of your debt. A bankruptcy trustee may make a formal proposal to your creditors under the Bankruptcy and Insolvency Act which protects you from further legal action from creditors.

Before agreeing to allow a third-party to negotiate your debt with creditors, BBB recommends consumers ask the following questions to ensure that they're dealing with the right company and getting the best guidance:

What is the company's performance in the marketplace?

Always check out the company with the BBB.org to find out their track record. Also ask the company about its own success rate.

How does the company and their representative get paid, and do they still get paid if they are unsuccessful at negotiating a debt settlement for you?

If company insists on payment upfront before reviewing your finances, or pays its representatives on commission, you may not be receiving the best advice on dealing with your debt. Keep in mind that debt negotiating companies cannot guarantee that creditors will accept their proposal to settle your debt for less than half of what you owe. If they are unsuccessful at negotiating on your behalf, find out if they will give you your money back.

Does the company make claims about the percentage of their clients that successfully settle their debts with creditors?

An ethical business will not make claims that cannot be substantiated. Privacy laws and confidentiality agreements will prevent a business from disclosing information about previous customers. If a company makes claims about the number of clients that they've successfully helped negotiate their debt, challenge the company to provide proof to validate their claims.

Is the company making guarantees that creditors will work with them in accepting a settlement?

While some companies may claim numerous success stories and assure you that creditors will work with them, there is no guarantee. If you are maintaining your payments, have a regular income or assets like real estate, your creditors may not accept a proposal to settle your debt. A good debt settlement company will tell you as much, and help you to evaluate all options to resolve your financial difficulties.