How Do Debt Settlement Plans Differ From Consumer Proposals

Debt settlement plans are offered by companies who are generally unregulated and purport to be able to settle debts for a reduced amount. Debt settlement companies work on the premise of building a fund from which they will settle debts after the debt settlement company’s fees have been paid. During the time of building the fund, debtors are generally advised to not contact the creditors. During this time there is no legal protection from creditors, that is, interest continues to accumulate and collection action, including garnishment, may commence or continue. The fees charged by the debt settlement company are not regulated and the same practices have been outlawed in the USA and in the province of Manitoba.Alert from the FCAC In January of this year, the Financial Consumer Agency of Canada, a Government of Canada agency, issued a consumer alert entitled Debt Reduction Companies: Beware of “Too Good to Be True” Offers Read the alerthere.Understanding Consumer Proposals Consumer proposals, on the other hand, are administered by trustees in bankruptcy that are licensed and regulated by the Office of the Superintendent of Bankruptcy, an agency of Industry Canada. A consumer proposal provides for relief from creditors and the administration costs (trustee’s fees) are regulated in accordance with the Bankruptcy and Insolvency Act. Click here for more information on consumer proposals.Getting Help to Manage Your Debt If you are having difficulty managing your debt, please contact an MNP licensed trustee for a no-cost, no obligationconsultation. Marvin Zweig, CA-CIRP, Trustee Senior Vice President Markham, Ontario