Tag: debt settlement vs consumer proposal canada

Categories
Brandon Blog Post

DEBT SETTLEMENT VS CONSUMER PROPOSAL CANADA: ENGLISH REALITY STAR NEEDS IT

Debt settlement vs consumer proposal Canada: Introduction

This debt settlement vs consumer proposal Canada Brandon’s Blog is to tell you a story how a once very rich person can run into debt troubles. If you want specific information about the difference between debt settlement and consumer proposal, read our blog “DEBT SETTLEMENT OR CONSUMER PROPOSAL CANADA: NEW CANADIAN GOVERNMENT REPORT EXPOSES DEBT SETTLEMENT COMPANIES HARMING CONSUMERS” published May 3, 2017. You may also wish to read our blog “FAMOUS CELEBRITY BANKRUPTCIES HAPPEN TOO”. Katie Price certainly fits into that crowd.

To find out more about how a consumer proposal works, you can also use the search function in our Brandon’s Blog site for any of the following phrases:

  • is consumer proposal worth it
  • consumer proposals faq
  • disadvantages of consumer proposal
  • consumer proposal vs credit counselling
  • how much does a consumer proposal cost
  • consumer proposal pros and cons
  • what happens after a consumer proposal

This will bring up more of our blogs on this topic.

Debt settlement vs consumer proposal Canada: The Katie Price Story

English former beauty model, reality TV star, and businesswoman, Katie Price, was a self-made success that had scooped ₤45 million after years of brilliant business transactions and plain old hard work. Unfortunately, the former glamour model will not have the ability to delight in the fruits of her work. It is said Katie is on the brink of bankruptcy having spent all her fortune.

Debt settlement vs consumer proposal Canada: Working for a pair of “knickers”

Things seem to be so bad the for the reality TV star mom. She once was paid for a social media post with one pair of slacks. Her ₤2 million Sussex estate has fallen under a state of disrepair. The swimming pool is dirty, yards are thick with growth and the tennis courts are abandoned. Katie, 40, has additionally begun marketing her horses and llamas. The ₤77,000 Audi she purchased for separated hubby Kieran Hayler for his 30th birthday celebration is also for sale.

The modelling jobs have dried up and last month she even admitted staging lewd images in Thailand with toyboy Kris Boyson. She was spotted mowing her own lawn amid claims she’s started laying off staff to stay in the black.

Debt settlement vs consumer proposal Canada: How Katie Price spent her money

Taking to Instagram, she also admitted the bailiffs had visited her house to demand £3,000 for an electricity bill. But what has the mother-of-five spent all her money on? On top of that, she’s said to have spent £120,000 on housekeepers, gardeners, and nannies – one of whom Kieran claimed to have had a year-long affair with.

Katie Price was also visited by bailiffs demanding the £3,000 she failed to pay an electrician. Her monthly heating bill apparently comes to £2,000 because she keeps it on 24-7, and her other monthly outgoings include £1,500 for twice-weekly manicures and pedicures, £1,000 on getting her hair done, £800 on massages every other day, £800 on a makeup artist, £400.

And that’s not to mention the apparent £60,000 a year she’s forking out on farm machinery such as a tractor and milking machine. She also spends on a £25,000 annual cosmetic budget.

Last Christmas she confessed ₤2,000 spent on decorations. She feared it may be her terminally ill mother Amy’s last one.

Debt settlement vs consumer proposal Canada: How Katie Price is now earning money

And while back then she generated millions from her scents, publications, reality TV show as well as x-rated shoots, nowadays her only source of work seems to be her program, My Crazy Life Now. She is determined to make back some money. Katie claimed to be intending to revive her beauty version alter ego Jordan. She also plans a release of a variety of sex playthings.

One source was quoted as saying “Katie told me when all else fails sex sells”. “It’s the way she’s taking things – she’s bringing back Jordan to fix her finances. She said that it was a no-brainer to go back to her old image.”

Debt settlement vs consumer proposal Canada: Are you in need of debt settlement?

If you’re thinking about debt settlement or a consumer proposal or are looking for ways to end your financial debt call Ira Smith Trustee & Receiver Inc. We understand the stress and pain your financial problems are causing you. We feel your pain and we can end it for you.

Our strategy for every single person is to develop a result we’re Starting Over, Starting Now comes true, starting the minute you walk through our door. You’re just one call away from taking the necessary actions to get you your debt settlement and back on the road to leading a healthy and stress-free life.debt settlement vs consumer proposal canada

Categories
Brandon Blog Post

GUIDE TO THE DIFFERENCE BETWEEN DEBT SETTLEMENT AND CONSUMER PROPOSAL

Difference between debt settlement and consumer proposal: Introduction

In last week’s vlog, “DEBT SETTLEMENT VS CONSUMER PROPOSAL CANADA: NEW CANADIAN GOVERNMENT REPORT EXPOSES DEBT SETTLEMENT COMPANIES HARMING CONSUMERS”, we reported on the recently released report by the Superintendent of Bankruptcy (OSB). The report is titled: “Review of Licensed Insolvency Trustee business practices to the administration of consumer insolvencies”. We gave an overview summary of the findings. In this vlog, we wish to get into some of the specifics of the OSB’s findings. The difference between such a settlement and consumer proposal when using a debt settlement company.

Difference between debt settlement and consumer proposal: Forced to pay money they can least afford

Cases handled by a Licensed Insolvency Trustee (LIT) that were referred by these types of settlement companies generally wound up paying much more for their insolvency case.

The debt consolidation companies called for a debtor to authorize a costly contract for speaking with the debt management company before being presented to a “picked LIT”. The people normally comprehended that the only function of the LIT as being restricted to the filing of the consumer proposal created by the settlement company!

In cases evaluated by the OSB, the consulting charge section of the contract contained a large amount for the debt consolidation company’s “help”. It was in the range of $2,400 to $4,200. For smaller consumer proposals, the OSB found that the consulting charge typically varied from 20% to 40% of the amount of the proposal.

Therefore, my read of this leads me to believe that certain LITs cooperated with such settlement companies to force insolvent debtors to pay thousands of dollars more than they otherwise needed to. These people could not afford this and did not deserve to be treated this way.

Debt specialist charges were purported to cover the expense of advising, conferences, recommendations as well as prep work of the consumer proposal. In all situations, the costs paid to the debt management company were IN ADDITION to the fees established under the Bankruptcy and Insolvency Act (Canada) charged by those LITs.

3bestaward

Difference between debt settlement and consumer proposal: If that isn’t horrendous enough, the debt management company sold them a larger bill of goods!

OSB’s study discovered that debtors were often marketed more products by the debt settlement companies. As a result, there were billings for extra recurring costs throughout the life of their consumer proposal!

The products the debt management companies pushed on these vulnerable people included:

  • loans charging a high rate of interest;
  • brand-new credit score tools;
  • a proposal insurance policy; and
  • “credit score restoring” loans.

All products carried either high-interest rates or high price tags.

Difference between debt settlement and consumer proposal: Forced to pay more than they should have

A technique identified throughout the OSB’s review entailed advertising and marketing “proposal insurance coverage”. This was normally billed as a month-to-month expenditure at a price of around 10% of the worth of the consumer proposal. This financing had recurring repayments supposedly for “credit rating fixing”.

In one instance, a debtor with a $31,900 consumer proposal signed up for proposal insurance coverage, structured as a loan. That base cost was about $6,300. Various extra fees, the month-to-month management cost as well as a 15% interest rate, the insurance coverage priced out at $9,150.

So, with the debt management company’s management fee of $2,300, the consumer proposal that the creditors voted to accept in the amount of $31,900 cost the insolvent individual $43,350!!! In my view, being merely associated with this type of behaviour is against the BIA, OSB Directives and the Canadian Association of Insolvency and Restructuring Professionals code of conduct for its members. As a LIT, I would never be associated with such disgraceful behaviour.

Difference between debt settlement and consumer proposal: Consumer proposals are like a 5-year interest-free loan, so why would you borrow to pay it off early?

An additional pattern observed in consumer proposals submitted by LITs dealing with debt management companies was the intro of “price cut terms”. This arrangement is for enticing the debtors to borrow money under arrangements made by the debt settlement company.

Incorporation of a discount rate provision provokes a debtor to become part of a brand-new as well as expensive loan scheme. To capitalize on a 25% discount rate condition in a $10,000 proposal, a debtor would finance $7,500. With paying $1,400 in compulsory charges, this brought the lending overall to $8,900. At a promoted rate of interest of 22.99 %, with a payment timetable of $214 over 84 months, the borrower would certainly pay $10,475 in charges as well as a rate of interest, for an overall of $17,975.

A consumer proposal is like an interest-free loan. The same debtor with the same beginning consumer proposal of $10,000, would only pay that amount if they went directly to the LIT first. The debtor would have had a maximum of 60 months to complete making the payments with no interest charges at all. A savings of $7,975 and lower monthly payments.

As you can see, involving the debt settlement company increased the cost for an insolvent person dramatically for no value.

Difference between debt settlement and consumer proposal: Other findings

Other findings by the OSB include:

  • the LIT files did not contain any obvious evidence of debt settlement company certification or experience in credit counselling or the counselling of insolvent debtors;
  • consumers who filed with a LIT through the debt settlement company did not have a good understanding of the insolvency process, the options that were available to them or the other charges they were paying to the debt settlement company
  • the consumers were not aware that they could have avoided charges such as paying a debt consultant to prepare the consumer proposal
  • that the documentation made ready for the consumer proposal filing by the debt settlement company and used by the LITs contained many errors
  • Statements of Affairs, as well as Income and Expense Forms submitted, were incorrect in different ways
  • Debt settlement company fees were not disclosed
  • Real estate was always undervalued compared to LIT files where there was no involvement of a debt settlement company

Difference between debt settlement and consumer proposal: What you can do

The OSB is considering its next steps. The OSB is requesting comments. We have already provided ours. Our recommendation was that all LITs who cooperated with debt settlement companies as we have described here should be brought up on disciplinary charges by the OSB. If you agree that this way of doing business on vulnerable and unsuspecting consumers who are truly looking for professional help must stop, please click here to offer your own comments to the OSB.

In the meantime, if you have too much debt, please DO NOT be fooled by the debt settlement companies. Stay far away from them. Instead, contact a LIT directly.

We are debt professionals who will evaluate your situation and recommend which debt relief options are right for you. We will do so in a free consultation. A consumer proposal is one option; there are others as well.

Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. There is no need for you to pay fees to a debt settlement company when you can get the same information from us for free.

You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a debt free life.

difference between debt settlement and consumer proposal

Categories
Brandon Blog Post

DEBT SETTLEMENT OR CONSUMER PROPOSAL CANADA: REPORT SAYS CONSUMERS HARMED

debt settlement or consumer proposal canada

Debt settlement or consumer proposal Canada: Introduction

In this Brandon’s Blog on debt settlement or consumer proposal Canada, I want to tell you about a recent Government of Canada study. On April 28, 2017, the Office of the Superintendent of Bankruptcy (OSB), released its report of its investigation. The investigation began in May 2016, of Licensed Insolvency Trustee (LIT) business practices in administering consumer insolvencies. The report is titled: “Review of Licensed Insolvency Trustee business practices in relation to administration of consumer insolvencies”. The OSB was becoming increasingly concerned about debt settlement vs consumer proposal Canada and the influence debt settlement companies may have had over certain LITs. I must say that after reviewing the report, I found it shocking.

The purpose of the investigation arose out of concerns over the relationship between debt settlement companies and certain LITs. The OSB wished to decide if LITs were practising per the Bankruptcy and Insolvency Act (BIA), associated policies and OSB Directives. In 2016 they made up over half of all consumer insolvency cases filed.

The aim of the OSB’s evaluation was to recognize as well as analyze possible threats related to the honesty of some elements of the consumer bankruptcy procedure. Specifically in situations where LITs have become part of companies’ connections (or, other inappropriate business relationships) with fee-charging debt management companies.

Prior blogs

We have warned you for years about the dangers of using these types of companies, including:

We, however, had no idea the harm caused to those most vulnerable consumers by a debt management company.

debt settlement or consumer proposal canada

What relationships did the OSB investigation find?

The OSB report indicates that in 2016:

  1. 17 % (9,660) of all consumer proposal filings, the borrower reported having spent first for liability counselling advice from a debt settlement company before being guided to a LIT.
  1. 57 % (5,500 of 9,660) of the consumer proposal filings for which earlier settlement advice was obtained from LITs that had connections with 2 large-volume debt management companies. These 2 companies represented 64 % of the overall LIT fees reported in 2016 consumer insolvencies filings for debt settlement advice before filing an insolvency proceeding with a LIT.
  1. Thirteen LIT companies, which included one national-level company, were discovered to have several LITs running in a constant and continual partnership with large-volume liability management companies.
  1. For roughly 50 individual LITs within these 13 companies, greater than 40% of their consumer proposal filings were sourced from these settlement companies. For roughly 20 of those LITs, greater than 90% of their consumer proposal work comes from with these 2 companies.

Insolvent debtors sourced through these third parties

Insolvent debtors sourced via these settlement companies had the tendency to go after consumer proposals instead of bankruptcy. On the surface, this is a good thing. As you will read further and in next week’s vlog, you will see the reason was so that these companies could charge in many ways the unwary consumers more money than they should be paying.

The OSB’s investigation showed that the debt settlement companies wrote up the necessary documents. The LITs never met the debtors beforehand.

The OSB investigation determined that:

  1. Before the LIT meeting, consumer borrowers connected and had 2 to 4 conferences with the management companies.
  1. The LIT relied upon the settlement companies’ staff to do all the work relative to the gathering, evaluating as well as confirming the borrower’s information and reviewing and recommending on the bankruptcy alternatives.
  1. In situations where the LIT had a regular relationship with the settlement companies, all facets of the procedure before declaring were normally executed at the offices of the management companies.
  1. Information needed for the filing was typically sent straight from the settlement companies’ management team to the LIT’s management team, usually soon before the meeting at which the consumer proposal filing was to occur.
  1. Debtor conferences with the LIT (a variety of which included the settlement company) varied in the period from 5 to 30 minutes. In some circumstances, the meeting took place just after submitting the proposal with the OSB.
  1. LITs normally met the borrower to file at the settlement companies’ premises.
  1. Sometimes, the authorizing of legal papers likewise happened in many casual areas as well as cities where the LIT did not have an authorized workplace.
  1. Interaction with borrowers on legal obligations, creditor meetings, evaluations by an Official Receiver, proposal changes and voting by creditors, was practically solely performed by the settlement companies’ management staff, that communicate with the debtor.
  1. The debtors reported that succeeding interaction throughout the management of their consumer proposal was additionally with the debt settlement company as opposed to with the LIT.

It appears that these LITs who had these close relationships with the debt settlement companies may have shirked some of their responsibilities under the BIA. These LITs had to sign off confirming to the OSB that they had done the necessary work. By relying upon the work done by unlicensed debt settlement companies, did the LIT really do the work that they are signing off for?

Debt settlement or consumer proposal Canada: So what does this mean?

In next week’s vlog, we will go into detail about what the effect was of all this. For now, you should know that a summary of the results for the consumer included:

  1. Consumers paid thousands of dollars more than they needed to.
  1. Unscrupulous debt management companies (and their cooperating LIT firms) talked consumers into high rate loans under the guise of shortening the time they were under an insolvency administration and improving their credit score.
  1. The debt settlement companies had no certification or experience to give the type of insolvency guidance they were providing.
  1. Legal documents contained countless errors and false attestations.
  1. Creditors received less than they were otherwise entitled to.
  1. Debtors had no idea of either their responsibilities under the process they were undertaking. They were not given the opportunity to experience one of the most important aspects of the Canadian insolvency system, financial rehabilitation.

Debt settlement or consumer proposal Canada: What should you do if you have too much debt?

Consult a LIT first and don’t go to one of the debt settlement companies. There is no federal government approved debt settlement companies. The only government approved debt settlement program is a consumer proposal.

We are debt professionals who will evaluate your situation and recommend which debt relief options are right for you. A consumer proposal is one option; there are others as well.

Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. There is no need for you to pay fees to a debt settlement company when you can get the same information from us for free.

You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a debt free life.

Categories
Brandon Blog Post

CONSUMER PROPOSAL VS DEBT SETTLEMENT: WHAT YOU NEED TO KNOW

consumer proposal vs debt settlement

Consumer proposal vs debt settlement

I am often asked to explain the differences of consumer proposal vs debt settlement. Debt is such a prevalent issue in our society today and we’re bombarded by commercials about different options for debt relief. Two of the most talked about are consumer proposals and debt settlement. However, most people don’t really understand what they are. Let me explain.

Consumer proposal vs debt settlement: What is a consumer proposal?

According to the Office of the Superintendent of Bankruptcy Canada, a consumer proposal (Plan or CP) is a formal, legally binding process administered by a Licensed Insolvency Trustee (LIT). In this process, the LIT will work with you to develop a Plan. A CP is an offer to pay creditors a percentage of what is owed to them or extend the time you have to pay off the debts, or both.

The term of a Plan cannot exceed five years. Payments are made through the LIT. The LIT uses that money to pay each of your creditors. CPs are government sanctioned, federally regulated and administered by federally licensed and regulated LITs.

Consumer proposal vs debt settlement: Can anyone who owes money opt for a consumer proposal?

No. You must be an individual and your total debts must not exceed $250,000 (not including obligations from a mortgage or line of credit secured by your principal residence). You also must meet the insolvency test. This means that:

  • your liabilities are greater than your assets;
  • if you liquidated all of your assets you would not have enough money to pay off your liabilities in full; and
  • you are having trouble making the full payment on all of your liabilities every month.

Making only minimum monthly payments don’t count as paying off your liabilities.

Consumer proposal vs debt settlement: What is debt settlement?

Many people are seduced by slick ads and even slicker salespeople offering an easy way out of financial problems. Debt settlement companies (DS companies) tell you that they’ll negotiate with your creditors to accept a fraction of what you owe them. They tell you that like magic, your debt problems will disappear. NOT TRUE!

DS companies’ people are not financial services professionals. DS companies are not federally licensed or regulated. They’re nothing more than snake oil salesmen. They are well-known for high-pressure sales tactics, making false and unsubstantiated claims, insinuating ties to the government and demanding big upfront fees. We’ve written several blogs warning the public about DS companies:

According to Credit Canada Debt Solutions:

  • There are more than 50 organizations offering debt settlement services in Ontario.
  • The Ontario Association of Credit Counselling Services has received more than 100 complaints a month about DS companies.
  • Settlement companies have also been the focus of a “consumer alert” from the Financial Consumer Agency of Canada, which warns consumers to beware of “too good to be true” offers from debt reduction companies.

According to the U.S. Federal Trade Commission:

  • The success rate of for-profit DS companies is less than 10%.
  • 65% of people who pay fees to these DS companies leave their programs without ever receiving a settlement.
  • The amount of money that people pay in fees to these companies almost equals the amount of money that they save. However, this is before creditor late fees, penalties and interest are added in (these can often double or triple a debt by the time a settlement is negotiated). So at the end of the day, it seems fair to say that most people who deal with these companies do not save any money and are often left worse off in the end.

Consumer proposal vs debt settlement: Who can administer them?

Since LITs administer CPs, the only federally licensed and strictly regulated professionals, they really can help you deal with financial problems. DS companies are not professionals of any kind. They are slick sales organizations designed to make as much money as possible from the consumer, not save you money or repair your financial situation. More often than not, after taking your money, DS companies then hand you over to a LIT for the only liability settlement program that really works, which is called, a consumer proposal.

The choice is clear when it comes to consumer proposal vs debt settlement, consumer proposals are an excellent financial relief option and you should run from DS companies as far as your shoes can carry you.

Sometimes a settlement is also termed consolidation. Whether the question is consumer proposal vs debt settlement, consumer proposal vs debt consolidation or debt settlement vs consumer proposal Canada, there is only one correct answer – look at a Plan for financial relief.

Consumer proposal vs debt settlement: Is a consumer proposal right for me?

Consult a LIT. We are financial professionals who will evaluate your situation and recommend which financial relief options are right for you. A CP is one option; there are others as well.

Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a liability-free life.

Call a Trustee Now!