Beware of Debt Settlement Offers

You may have you seen TV or online ads from companies claiming they can reduce your debts by up to 80%.  They often pay actors or well know celebrities to endorse their product to make it seem more legitimate.  These ads may appeal to you if you are struggling with debt and are trying to find a way out of your financial situation.  But are the promises they make too good to be true?

First of all, no company can guarantee results when it comes to negotiating settlements with your creditors.  When you signed your original credit agreements you agreed to repay the debts with interest.  So your creditors are under no obligation to accept anything less.  Some Provincial governments, the Better Business Bureau, and consumer groups have warned consumers about these companies so make sure you do your research before entering into a debt settlement agreement.

The debt settlement and credit counselling companies would have you believe that they can easily have your credit balances reduced and save you hundreds if not thousands of dollars.   The problem is they cannot guarantee any results.  They will require that you pay them monthly administration fees and/or a percentage of the settlement amount as payment for their services.  But you need to read their documents very closely to find out what happens to all of those fees that you have paid if they are unable to reach agreements with some or all of your creditors.

If you are able to repay a portion (percentage), but not all of your debt, your best option is to contact a Licensed Insolvency Trustee (LIT).   A trustee can negotiate a reasonable settlement, either by way of lump sum payment or monthly payments, through a consumer proposal to help you clear up your debts.   Unlike debt settlement and credit counselling company programs, which provide you with no legal protection or guarantee of results, a consumer proposal is a legally binding on all of your creditors as long as the majority of them accept the proposal.    The debts settled through a consumer proposal will be is rated as R-7 on your credit report and will be removed 3 years from the date it is completed.  The debt settlement and credit counselling company programs will get reported as either R-9 and will not get removed from your credit file until 7 years after they are paid.

For a free consultation over the phone or in person in Saint John, Moncton, FrederictonCharlottetown or Dartmouth, please contact us.  Powell Associates Ltd. is a licensed insolvency trustee focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses.