The Problem with Debt Consultants

Posted in Bankruptcy Trustee
Posted by J. Douglas Hoyes, CA, CPA, LIT, CIRP, CBV

problem-with-debt-consultantsWe’ve all heard the ads: “Government program will reduce your debts!  Call now! Operators are standing by!”

Most of us have also received phone calls from telemarketers (they always call when you are eating dinner) promising to settle your debts if you “Act Now!”

Who are these Debt Consultants, and why can they afford to advertise heavily and hire telemarketers?

The answer is that many of these debt consultants aren’t anybody at all.  They don’t have any professional qualifications, and in many cases they don’t even have offices in Canada.  They work out of call centers in the U.S., they take your money and often don’t do anything at all.  (It’s easy to have lots of money to spend on advertising if you never incur any costs to actually provide a service).

Believe it or not, many of them are nothing more than a referral service for Bankruptcy Trustees!  They charge you a huge fee and then refer you to a trustee!

I’ve written extensively on this subject many times before.  Last year I wrote about some specific cases in my article on Debt Management and Debt Settlement Plans: Scams, or a Good Alternative to Bankruptcy in Canada?

Two weeks ago I reported on the results of my investigation into Cambridge Life Solutions, one of the big advertisers on radio.  When you read the article you will see that this is a classic example of a company from the U.S. making phone calls from their U.S. call center to unsuspecting Canadians.

So why do these Debt Consultants exist?  They exist because most people with debt problems have never had debt problems before, so they don’t know who to turn to for help.  You don’t want to talk to a Bankruptcy Trustee, because you’ve heard that Bankruptcy Trustees in Canada work for the creditors, right?  (It’s not true, but that’s what debt consultants want you to believe).  So, when you have a problem, you call the company that advertises the most.

Debt Consultants do not require a government license, or any formal training, so anyone can call themselves a “Debt Consultant”.  (You can read the Doug Hoyes biography for details on my professional qualifications and experience).  That makes it easy for anyone to set up shop and start taking your money.

Debt Consultants often charge huge up front fees.  It’s not unusual to pay hundreds, even thousands of dollars to them before they even pick up the phone to contact your creditors to see if a deal is possible.  At Hoyes Michalos you don’t start paying until your consumer proposal is filed with the government, and a legal “stay of proceedings” is in place, preventing your unsecured creditors from taking you to court and garnisheeing your wages.

Finally, as noted above, a licensed Bankruptcy Trustee and Consumer Proposal Administrator like the professionals at Hoyes Michalos, provide legal protection from your creditors.

Debt Consultants don’t.

I have no objection to companies helping people deal with their debts.  I do object to unregulated companies with no professional qualifications using telemarketers to entice unsuspecting people into parting with thousands of dollars, for nothing.

My advice? Do your research.

Before you hire anyone to help you solve your debt problems check them out on line, then arrange a personal, in person meeting.  At Hoyes Michalos we are happy to talk to you over the phone to answer your questions, or give you some ideas with our free bankruptcy evaluation, but all the technology in the world is no substitute for a personal meeting.  So before you sign any paperwork with us, and before you pay us any money, we will meet with you in person to review your options and help you make a plan that’s right for you.

Do your research; the decision is up to you.