What Are The Differences Between An LIT And A Debt Consultant

There are two options you’ll want to fully consider; a Licensed Insolvency Trustee and a Debt Consultant. We’re going to take a look at both options to find out which one is right for you.

Debt Consultant

Financial counselling is the most common service provided by a debt consultant. One on one options (consultations) are available, along with group courses or seminars. These services are designed to help consumers understand budgets as well as credit, so they can use both wisely, and avoid debt again in the future.

Some debt consultants offer sessions that assist consumers with payment strategies but they don’t eliminate your debt or stop the creditors from calling. Speaking to a debt consultant doesn’t affect your credit score either.

These services are offered by both for-profit and not-for-profit organizations, so if you’re considering working with a debt consultant, the first thing you need to do is look at the organization’s fees. Determine the services that the agency provides including the type of support they offer and money management programs.

These programs often require you repaying 100% of your debt. If you or your debt consultant feel that doesn’t work for you then you may need to work with an organization that can provide services such as negotiating with creditors.

Licensed Insolvency Trustee

LITs are licensed by the federal government’s Office of The Superintendent of Bankruptcy. That means they can provide additional information about debt relief that debt consultants can’t. LITs are also able to administer consumer proposals and bankruptcies.

Becoming a Licensed Insolvency Trustees requires a lot of education and experience. The LIT must have a degree from a Canadian university as well as five years of relevant experience in the profession of insolvency. When they apply for their license, the professional must demonstrate a solid base of knowledge and experience in the insolvency industry. There are also qualification programs they must complete as well as a police clearance.

Most Licensed Insolvency Trustees offer a free consultation to review your finances and discuss available options. Bankruptcy and consumer proposals are two options that can help eliminate your debt.

With bankruptcy, your unsecured debt is discharged, meaning you can start your financial life over. Each situation is different, occasionally you may need to make some payments to your creditors, but you normally won’t have to pay the debt in full.

A consumer proposal allows you to negotiate your debt with unsecured creditors. The creditors that are owed the majority of your debt need to agree to the terms of the proposal (which your LIT put together). When they do, you will be responsible for paying a certain portion of your debt, often around 30%-40% but as low as 2%. It’s important to note that an accepted consumer proposal means you can no longer be threatened with lawsuits frozen bank accounts and garnishments.

The biggest difference

• REGULATION: As mentioned earlier, there are steep requirements to becoming a licensed insolvency trustee, while the debt consultant industry is not regulated. Unregulated means the services provided by each debt counsellor differ, along with their strategies and their fees. Additional research is needed before working with a debt consultant, to ensure they’re working in your best interest.
• IMMEDIATE ACTION: A debt consultant isn’t able to make any immediate changes to your situation. However, once you are formally involved with an LIT your creditors have to stop all actions including calling you, or garnishing your wages.
• PAYMENT: All licensed insolvency trustees offer free consultations, while many debt consultants charge a fee.