Where Can I Get Free Bankruptcy Counselling in Canada?

By Carmen Chan

If you’re struggling with your finances, the idea of filing for bankruptcy to get out of debt may have crossed your mind. But who can you talk to for free bankruptcy counselling in Canada? With the cost-of-living crisis and other financial stressors continuing to plague Canadian consumers, bankruptcy filings are on the rise as individuals and families struggle to make their loan and credit card payments.

If you’re not sure if declaring bankruptcy is the right decision for you, here’s what you need to know about free bankruptcy counselling options and how they can help you make an informed decision.

What is Bankruptcy?

Bankruptcy is when a person can no longer repay his or her debts to their creditors. It’s a legal arrangement that bars creditors from continuing to demand repayment. It’s worth noting that certain debts are excluded from a bankruptcy filing, ranging from money owed for child or spousal support to court ordered fines and government-issued student loans if you’ve been out of school for less than 7 years.

Bankruptcy is a process that’s governed by the Bankruptcy and Insolvency Act (BIA) and is usually only an option if it’s deemed that the consumer can’t viably repay their debts and all other options have been exhausted.

And bear in mind, it’s often seen as a last resort option. It can affect your credit and job opportunities for many years to come. Bankruptcy takes its toll on your credit rating, with the lowest rating lingering on your report for at least 6 years after the 1-2 years it takes to get your discharge. This could extend to 14 years or more for any subsequent bankruptcies you file. The bankruptcy notation will make it incredibly difficult to qualify for new bank loans, credit cards, car loans, mortgages, and other credit products.

How to Get Free Bankruptcy Counselling

Generally, you have two options to receive free bankruptcy counselling to help you determine if it’s the right path for you. They include:

Speaking to a Credit Counsellor for Debt Help

Before pressing ahead with the bankruptcy process, you should speak to an accredited, experienced credit counsellor at a non-profit agency for debt help and an objective look at your overall circumstances. We’re certified professionals who can give you guidance about your financial situation – initial consultations are free, confidential, with no strings attached.

To get a snapshot of your finances, your credit counsellor will ask you about your income, assets, expenses, bills and debts, as well as your financial goals. Then, they’ll advise you on your debt relief options, from debt repayment plans to consolidating your debts and, of course, bankruptcy or a consumer proposal.

Meeting with a Licensed Insolvency Trustee (LIT)

If you’re still thinking of moving forward with declaring bankruptcy, you need to recruit a Licensed Insolvency Trustee or LIT based in your province. They’re the only people licensed by Canada’s Office of the Superintendent of Bankruptcy (OSB) to carry out proposals and bankruptcies.

Your trustee will be your advisor through the process, from filling out and filing paperwork to representing you to the court to obtain your discharge. It is a 9 to 21-month process, but if it’s your second time filing for bankruptcy, the process can take up to 36 months.

When you meet with one of CCS’s credit counsellors, we can refer you to reputable LITs in your area, so that you don’t end up at a get-out-of-debt quickly business that could leave you with hefty bills and fine print. Selecting the right trustee is key as they will ensure your rights are respected while they work as officers of the court and recover as much money as reasonably possible for your creditors.

Your LIT will meet with you for a free initial consultation, in which you’ll go over your financial situation, taking into account your income, assets and debts. The trustee will apprise you of the fee to file the bankruptcy and what, if any, of your assets they will need to liquidate as part of the process.

What are My Alternatives to Bankruptcy?

While bankruptcy may immediately come to mind when you’re having financial trouble, there are alternatives to bankruptcy that many people don’t know much about. Options include debt management programs, traditional debt consolidation, debt settlement, or consumer proposals. These bankruptcy alternatives won’t hurt your credit score and future prospects for getting a loan as much as bankruptcy will.

Your credit counsellor can walk you through the options to help you decide the best course of action:

• Debt Management Programs are a voluntary arrangement between you, your creditors, and the Credit Counselling Society that helps you get out of debt. Your credit counsellor acts as a facilitator between you and your lenders, to come up with a single, manageable payment for your unsecured debts, e.g. credit cards, payday loans, overdrafts, and personal loans. Your creditors support the program by waiving or reducing ongoing interest charges so that you can realize your goal of becoming debt-free sooner.
• Debt settlement is when you offer your creditors a lump sum of cash to settle your debts. Once your creditors accept the settlement agreement and the cash, the debts are considered “settled in full” and you no longer owe the remaining funds. You can broker this settlement on your own by calling your creditors, but it can be a time-consuming process. The Credit Counselling Society can work on your behalf to settle your debts. If your creditors agree to a settlement, CCS will transfer the funds and help you rebuild your credit rating more quickly than if you settle the debts on your own.
• Debt consolidation is when you merge all of your loans into a single, new account. The typical way this is done is through your financial institution. If you qualify, they will approve a loan, pay out your unsecured debts, and you move forward making a single payment. The catch, however, is qualifying at a reasonable interest rate as well as living according to a budget until the new loan is paid off. If you don’t, you could inadvertently double your debt.
• Consumer proposals combine elements of a debt management program with bankruptcy proceedings. Just like filing for bankruptcy, you’ll need a Licensed Insolvency Trustee to move forward with this option. It’s a legally binding agreement between you and your creditors, where you’re committing to repay a reduced amount of the debts you owe within a specified period of time, such as five years.

Still Looking to Get Free Bankruptcy Counselling? Start here.

When you’re grappling with financial distress and don’t know what your next step should be, contact a credit counsellor for guidance about where to get free bankruptcy counselling. With all of the options available to you, help figuring out where to start is invaluable. A credit counsellor will look over your financial situation and provide a tailored plan based on your circumstances and goals. They can help with creating a budget, to managing debts and working out a repayment plan. There are no hidden fees, fine print or strings attached – just practical solutions for your debt