There are two plans that debt consultants use that scare me.
First I want to tell you about Mary (not her real name). Mary didn’t want to file for bankruptcy and was attracted by one of those ads we all see: “Avoid Bankruptcy, we can reduce your debts up to 70%”. She called the company and was told a first meeting was $1,500. She only had $300, but was told that was OK to talk, but she would need to pay the rest before a plan was in place. She paid the $300 and met with a person, let’s call him Bert, at his home, who told her how he could eliminate her debts through a consumer proposal. Once she paid the remainder of the money, Bert would complete her paperwork and a government official would meet with her. She was told she couldn’t ask this government official any questions and that if she had any question, she was only to ask Bert. A few months later Mary was still trying to save the rest of the money to pay Bert. In the meantime, creditors were calling her. She called Bert for advice and was told that until she paid the rest of the money, he would not speak with her. She then found me and filed a consumer proposal. How much did it cost her to meet with me? Nothing.
Why is that scary?
- Only a Trustee can administer a consumer proposal. Although we are licenced by the government, we are not government officials.
- You are allowed to ask questions when you are signing your consumer proposal paperwork. In fact, we encourage it if there is something you don’t understand.
- You don’t need to pay a referral trustee to meet with a trustee. I am not saying it’s wrong to charge a fee to meet with someone, it just has to be reasonable.
- Why did she meet with Bert at his home and not his office. Does he even have an office? You only meet with us in our offices in Windsor and Leamington.
Next, I want to tell you about George. George owed $20,000 in credit card debt. He emailed a debt consulting company he found on the internet when he searched “debt help”. They emailed him back telling him he could eliminate his debt if he gave this company his bank account number and they would start taking $650 a month for his bank account. They sent him a contract to sign which stated what they were going to do. It sounded good, so George signed the contract and emailed it back, along with a voided cheque. They would take $650 from his account for the next 2 years. The first year of payments went towards their fees. After a year, they would approach each creditor and offer them a settlement based on the money that was in George’s account. He was told not to pay any of his bills and told him if any creditor call he is to give them a “special phone number”. It sounded good, so George signed the contract and emailed it back, along with a voided cheque. George paid $650 for 2 months. He found the creditor calls overwhelming, they were calling him several times a day at home and at work, and were threatening to take him to court. Just for fun, George decided to call the “special phone number” he was given. To his surprise, it was a recorded message stating “Hi, I am not home right now, please leave a message”. George called up the company and told him he was stopping the plan. He was told he couldn’t and they would continue to take $650 from his bank account. He promptly called his bank, put a stop payment on the withdrawals and came to see me. I reviewed his debts, assets and budget and determined that a suitable consumer proposal would be $200 per month for 48 months. George wants to be debt free in 2 years, so once his proposal was accepted, he increased his payment to $400 a month.
There are several reasons why this is scary:
- George never met with anyone or even spoke with someone on the phone,
- In the year it would take to pay the debt consultants fee, George has no legal protection from his debt. Phone calls continue and legal action can start. A consumer proposal gives you immediate legal protection from your creditors (there are a few exceptions such as child support).
- He is paying them $7,800 before they will even start to deal with his debt. A consumer proposal starts the day you sign the paperwork.
- They refused to honour George’s request to stop the plan. If at any time your situation changes call and we can discuss your options.
For legal protection, don’t pay fees you don’t have to pay. Come and see me and I can review your options with you.
About Rebecca MartynRebecca Martyn is a bankruptcy trustee and consumer proposal administrator responsible for the Hoyes, Michalos & Associates office in Windsor, Ontario.