A Consumer Proposal is best described as one of the debt relief strategies that help individuals struggling with significant debt or insolvency. This proposal involves agreements between the insolvent individual and their “unsecured creditor”. This allows insolvent people to pay a dramatically lowered percentage of what they owe on their debts.
A consumer proposal administrator is a person that carries our consumer proposals. Keep reading to learn more about how consumer proposal administrators help consumers and more about their roles.
Who Is Allowed To Be A Consumer Proposal Administrator?
Only LITs (licensed insolvency trustees) are permitted to perform the role of a consumer proposal administrator. In Canada, none of the other professionals are allowed legally to administer these consumer proposals. This means no accountant, lawyer, financial advisor, debt consultant, or credit counselor can fulfill this particular role.
A licensed insolvency trustee is permitted to fulfill this specific role since they are debt professionals who are federally licensed to provide services and advice to businesses or people struggling with their debts. The services on offer include personal bankruptcy filings, division one proposals, and consumer proposals.
In addition to federal licensing, the LITs are also federally regulated. This means that these professionals are subjected to oversight by the OSB (Office of the Superintendent of Bankruptcy). This ensures that they uphold high standards relating to this position and that they never violate the stringent code of ethics. These are regulations and rules that ensure people in Canada are getting the needed support, especially when they are in the most vulnerable positions.
Who Can File A Consumer Proposal?
It is essential to be aware that only a licensed insolvency trustee is legally permitted to perform the role of a consumer proposal administrator. For any person that is approached by debt solution agencies that claim they can file Consumer Proposals, it is important for the individual to request the company’s credentials and to find out as much as they can about the organization.
Unfortunately, there are many debt solution firms that are illegitimate that prey on people that find themselves in desperate situations. Before you put your trust in a company, take the time to conduct your research and make sure they are Licensed Insolvency Trustees.
How To Ensure You Are Working With A Licensed Insolvency Trustee
- They state clearly on their website and in their advertising that they are in fact Licensed Insolvency Trustees (formerly known as Bankruptcy Trustees).
- The LITs and the firm have been listed in the Licensed Insolvency Trustee Registry.
If you cannot find these clues, it is best to find a company that can prove these credentials. This can also mean that the company is not one of the licensed insolvency trustees and they won’t be able to file a Consumer Proposal on your behalf.
What Is The Role Of A Consumer Proposal Administrator?
Consumer Proposal Administrators are professionals that carry out the role of filing consumer proposals. They can also determine when a debtor (someone struggling with their debts) qualifies for these services or when they should be using another strategy to obtain debt relief. Below are a few of the primary responsibilities linked to this role:
Filing Your Proposal
If you have qualified for a consumer proposal and you have decided this is the best path for you to follow, the consumer proposal administrator will help you to work out how much you can afford or manage with your proposal payments. They then draft this proposal, followed by filing the paperwork. The next step involves contacting all your unsecured creditors to discuss this potential agreement.
If a large percentage of your creditors have agreed to this proposal, it will go into effect. Throughout this proposal, your administrator will collect and make payments, contact your creditors, and arrange for credit counseling sessions which will be mandatory with this process. They will assist you through each step of this process, from start to finish.
Amending Proposals
If a large percentage of your creditors refuse the proposal, then your administrator can assist you by amending the proposal to ensure it comes across as more appealing. If this amendment fails to work, your administrator might recommend that you will need to file for Personal Bankruptcy as the next alternative. Consider the details of amending your consumer proposal and the reasons why unsecured creditors may be rejecting your terms.
Acting As A Mediator
The most important role that consumer proposal administrators perform is to act as a mediator. They can be seen as an impartial boundary that occurs between the applicant and the creditors. This means that when the applicant has complaints or wants to alter their proposal, they can consult with the administrator. At the same time, when a creditor wants to question an applicant or has an issue, they will need to deal with the administrator.
Repaying debts is often a stressful and tense experience. When you have an experienced mediator on your side it can make your repayment process a lot smoother, conflict-free, and ultimately successful.
Licensed Insolvency Trustees Vs. Debt Consultants
Debt settlement programs that are on offer by for-profit, unregulated, and unlicensed organizations can be extremely risky! Many debt settlement programs may claim that they can provide “debt relief” from creditors, but this comes without the legal protection that a Consumer Proposal provides. Many of these debt settlement programs will also require that all the creditors have to agree on the repayment terms. In comparison, a Consumer Proposal will only require 50% of the creditors to give the go-ahead, which means any remaining creditors will be bound to your consumer proposal.
If you have decided to use one of the unlicensed and unregulated debt settlement agencies, they will ask you to stop paying your list of unsecured creditors. You will be required to make these payments to the debt settlement company directly. Once they have collected a sufficient amount of funds from you, only then will they start contacting your creditors. They will then try to strike deals with these creditors, to try to make them settle for lump-sum payments that will be a lot lower when compared to what you owe. The practice will be repeated over a long period. But you might not know that this could take several years.
But it is important to keep in mind that one or all of your creditors may reject these offers, or worse, they could decide to take legal action against you for collection while waiting for offers, since stopping payments altogether will result in a default on your debt contracts.
Here are some of the warning signals that the company you are dealing with is one of the debt settlement programs:
- You cannot find any information on their website that states they are licensed, insolvency trustees.
- They asking for a fee upfront.
- Since the debt settlement programs are not regulated, they can charge excessive and steep fees.
- When the company is putting pressure on you to make a decision, you should seriously reevaluate whether you want to continue.
- The licensed insolvency trustees will first assess your comprehensive financial situation, followed by giving you informed advice on the options available to you. They will also not put pressure on you when it comes to signing up for services you don’t need or want.
- There is no feedback or reviews from customers on their website, or the reviews look like they have been fabricated.
- They won’t allow you to view the entire contract before signing which would have given you enough time to understand and read over the document.
The biggest issue surrounding debt settlements is the fact that they are on offer by individuals known as debt consultants. The difference between a debt consultant and a licensed insolvency trustee is that a debt consultant is not licensed or regulated, which means you cannot be sure if they have experience or education that relates to financial woes. The debt consultants are also not regulated by the government, which means you also cannot be sure that the practices they are using are legal or ethical. The most important aspect is that a debt consultant has no authority over a creditor in any way.
Unsecured creditors are not required to listen to debt consultants. They are not even required to answer their emails or calls. If debt consultants attempt to tie the creditor into a deal, the creditor can still break this deal whenever they feel like it, since the agreement is not legally binding. This is why so many of the debt settlement programs are so risky.
This means you could go through a lengthy process to try and settle your debts, and the debt consultant might not be able to strike any deals with your unsecured creditors. If this does happen, you might find yourself in an even worse financial situation than you were before consulting with the organization. Your debt load will be larger and you will have accumulated late fees, penalties, and interest. The worst part of these situations is that your creditors may decide to legally take action to collect these funds from you.