Frequently asked questions

Each financial situation is unique. What could be considered serious debt problems for one person might be fine for someone else. Here’s how to recognize the warning signs about having too much debt:

• Struggling to pay your debts and expenses each month
• Only making the minimum payments
• Repaying your debt is causing you stress
• Hiding your debt from loved ones
• Receiving calls from creditors or collection agencies
• Using one credit card to repay debts on another
• Missing payments or making payments late
• Taking out new loans to afford to repay your current debts
• Don’t have a budget or can’t stick to a budget
• Not sure how much debt you have
• Regularly use payday loans

A debt challenge is when you’re struggling with managing your debts. You may have trouble making regular payments to pay off your bills, and the amount you owe keeps growing.A budget problem is when you’re having difficulty creating and sticking to a budget. You may be having difficulties managing your income and expenses and find it hard to save.

LITs are the only experts in Canada authorized to help reduce or eliminate debt through a consumer proposal or bankruptcy. As LITs, we help people who have problems repaying their debts by providing practical advice and offering strategies that reduce your debt obligations.LITs are regulated by the Office of the Superintendent of Bankruptcy (OSB), a division of the federal government.

Calls from collection agencies and creditors can be annoying and even harassing. And they won’t just give up and stop calling. But there are ways to properly handle them.The quickest way to stop collection calls and move on with your life is to contact an LIT. If you’re facing collection calls, you’re likely already facing debt problems. LITs are the only professionals in Canada legally authorized to file consumer proposals and bankruptcies. They also provide advice and assistance about other debt management options.To find out more, book a free, confidential, no-obligation consultation with a Farber debt expert today.

Everyone’s financial situation is different. Here are some questions to ask your LIT during the first consultation.

• What is the best debt-relief option for my situation?
• What are the pros and cons of any other options?
• Which of my debts will be affected?
• How much will this cost?
• Will anyone else in my family be affected by the solution suggested?
• How will this affect my credit rating?
• Who will I work with throughout the process and how often will we speak to each other?
• How long will I be committed to my debt-relief solution?
• Once you help me with my debt, is that the end of our relationship?

Making the first step to gain control of your debt can feel intimidating. But sharing your concerns with a debt expert means you’ll receive compassionate, non-judgmental advice that can help you make informed financial decisions. Here are some of the other benefits:

• Your consultation is completely free of charge
• Having a confidential discussion
• Feeling no pressure or obligation
• Exploring all available solutions
• Gaining confidence and relief knowing a solution is within reach

Each financial situation is unique. What could be considered serious debt problems for one person might be fine for someone else. Here’s how to recognize the warning signs about having too much debt:

• Struggling to pay your debts and expenses each month
• Only making the minimum payments
• Repaying your debt is causing you stress
• Hiding your debt from loved ones
• Receiving calls from creditors or collection agencies
• Using one credit card to repay debts on another
• Missing payments or making payments late
• Taking out new loans to afford to repay your current debts
• Don’t have a budget or can’t stick to a budget
• Not sure how much debt you have
• Regularly use payday loans

A consumer proposal significantly reduces most unsecured debts you have, including:

• Credit card debt
• Tax debt
• Student loans (if 7 years have passed since you were last a student)
• Personal loans
• Lines of credit
• Payday loans

A consumer proposal is a formal agreement between you and your creditors that’s submitted on your behalf by a LIT. It includes an offer to your creditors to settle your debt for an amount that is normally less than the total amount owing – as much as an 80% debt saving. Most importantly, it allows you to retain assets, such as your car and your home.A bankruptcy is a legal process in Canada legislated under the Bankruptcy and Insolvency Act (BIA) that’s designed to give a debtor a fresh start. A bankruptcy in Canada can only be filed with a LIT. With bankruptcy, you surrender your assets to the LIT for the general benefit of your creditors. However, you do not lose everything when you file a bankruptcy. Certain exemptions permit you to keep some assets.

There are two types of debt consolidation – high-interest debt consolidation loans and interest-free consumer proposals.Many people know about debt consolidation loans, but know less about an interest-free form of debt consolidation called a consumer proposal. It’s a better way to consolidate and reduce your debt in many situations. We do not provide loans. If you’re looking for a loan, we suggest you speak to your bank first to see if you qualify for one.For many Canadians, high-interest and hidden-fee debt consolidation loans can lead to even more financial stress and payments that even exceed the original debt. A consumer proposal is a federally regulated program designed to help Canadians reduce and eliminate debt without loans and rebuild their financial security. A debt consolidation loan does not eliminate interest, stop collection calls, wage garnishment, or offer the legal protection a consumer proposal can.

Filing a consumer proposal doesn't damage your credit forever. While it impacts your credit rating, it's often already been affected by missed or late payments. But many people have been making minimum payments for some time, which helps maintain stronger credit scores.Addressing your debt through a consumer proposal benefits you in the long run, though it takes time. A consumer proposal helps you rebuild your financial life. By ending the minimum-payment cycle, you can responsibly acquire new credit. The two mandatory financial counseling sessions teach valuable money management and budgeting skills, helping you manage your finances and rebuild your credit rating.

A consumer proposal significantly reduces most unsecured debts you have, including:

• Credit card debt
• Tax debt
• Student loans (if 7 years have passed since you were last a student)
• Personal loans
• Lines of credit
• Payday loans

One of the major benefits of a consumer proposal over bankruptcy is you can pay it off earlier and feel more freedom (a proposal can be paid down at any time after acceptance by your creditors and the court). And unlike high-interest debt consolidation loans, a proposal means there are no penalty charges or interest. In fact, we encourage you to pay down a consumer proposal as quickly as possible, so you can receive your Certificate of Completion earlier and begin improving your credit rating.

Most consumer proposals last from three to five years, with five being the most common. You make one monthly payment to your LIT, who then pays your creditors. This allows you to manage your expenses more easily by spreading out the total amount owed.Once accepted, it's legally binding on all creditors, unlike other debt settlements where each creditor can opt out. In a proposal, the majority of your creditors have to agree to an amount they’ll accept for your outstanding debt. Once that happens, all creditors are bound, even if a minority voted against it. After your final payment, a Certificate of Completion is issued, notifying credit bureaus of your successful completion.

You can’t file on your own. Under the Bankruptcy and Insolvency Act, only a LIT can submit a consumer proposal in Canada. A debt consolidation firm or credit counsellor also cannot file a proposal for you.LITs are licensed by the government and understand both provincial and federal laws. They’re required to file a proposal properly so it’s legally-binding on you and your creditors.

When you file for bankruptcy, your creditors cannot take legal action against you. They can’t sue you, take money from your wages, or keep calling you to ask for payment.

In bankruptcy, you surrender your assets to the LIT for the general benefit of your creditors. However, you do not lose everything when you file a bankruptcy.There are exemptions, based on the province you live in. But, in most cases, you can usually keep these assets when filing bankruptcy in Canada:

•  A car, valued to a provincial limit
• Personal belongings and clothes
• Equipment related to work
• Furniture, food, and tools in your house
• Some types of agricultural property
• Any RRSPs, RRIFs, RESPs, RDSPs savings (except if they were made in the year before filing bankruptcy)

The bankruptcy process is designed to focus on rehabilitation not punishment. Each province and territory has its own exemptions to the bankruptcy law that outline which of your assets, and how much equity, you are allowed to retain.

Filing a bankruptcy is a legal process and cannot be done on your own. Bankruptcy can only be filed by a LIT.

When you file for personal bankruptcy, your credit score is affected for six years after you have been discharged. A note is placed on your credit report, which makes it hard to get a loan or to get credit at a lower interest rate.However, you can rebuild your credit by following good credit habits. This includes borrowing reasonable amounts and paying them back on time. Getting a secured credit card (a credit card that is backed by a deposit) can help you rebuild your credit score. Whether it’s the best time to declare personal bankruptcy or not, know that your financial life is not over once you file for personal bankruptcy. While there are certainly consequences, you can still rebuild your financial health.

Bankruptcy is not your only option. It’s used as a last resort when other solutions have been ruled out. In bankruptcy, you surrender most of your assets to the LIT for the general benefit of your creditors. Many people are surprised to learn that bankruptcy doesn't solve everything.

• Doesn’t erase all debts
• Involves using your assets
• Impacts your credit score
• Makes it harder to borrow again

A consumer proposal is a formal and legally-binding debt settlement agreement between you and the companies you owe money to (your creditors). It can reduce your debt by up to 80% forever–without any fees or interest charges.

If you have a lower credit score, getting a traditional loan is harder. However, you can get a secured loan when you use something valuable you own as collateral. Before you apply for this kind of loan, consider filing for a consumer proposal, where you can actually reduce your debt, pay no fees or interest and do not need to use your possessions to secure the loan.

Opting for a debt consolidation loan with an unaffordable interest rate can lead to difficulty in making monthly payments, which can harm your credit score. And if your credit history is already poor, you may only qualify for debt consolidation loans with extremely high interest rates.

Most debt consolidation loans allow you to keep your credit cards. But this can work against you. It’s easy to start using credit cards again and end up back in debt, plus you’ll also have to pay the debt consolidation loan.

Consolidation loans often come with administration fees in addition to interest rates. These fees can range from $1,000 to $6,000, depending on the loan amount and duration. To understand the true cost of consolidation, you need to include these fees in your calculations. The actual cost may be higher than expected once all fees are considered.

Consolidating debt with a low-interest loan can stop collection calls and simplify payments. However, if you only qualify for high-interest loans, it can lead to long-term consequences.A consumer proposal can be a better approach to a high-interest loan, and will actually reduce your debt by up to 80%. It ensures that you pay what is fair, with the rest of the debt forgiven–forever.

You might need debt counselling if you are struggling to make your minimum payments, using credit to pay for basic necessities, receiving collection calls, or feeling overwhelmed by your financial situation.

Our debt experts are happy to talk with you about your situation. To set up a free consultation, just contact us.

Yes, debt counselling can help you explore alternatives to bankruptcy, such as a consumer proposal, which can reduce your debt by up to 80%. A LIT can help create a plan to manage and reduce your debt, which may allow you to avoid bankruptcy. However, if bankruptcy is necessary, a LIT can also provide guidance on the process.

Debt counselling involves creating a plan to manage and reduce your debt through budgeting and negotiation. A debt consolidation loan involves taking out a new loan to pay off multiple debts by combining them into a single loan with monthly payments.

During your first session, our friendly debt experts will listen to you and hear about your financial situation, including your income, expenses, debts, and assets. They will then work with you, step-by-step, to create a budget and develop a plan to manage and reduce your debt.

LITs help you navigate debt-related issues and offer support as you build your overall financial wellbeing. Farber LIT’s offer free, confidential, no-obligation consultations to assess your financial situation, and provide guidance–not only for your debt issues, but also for your future financial health.Once a LIT has reviewed your specific situation with you, they’ll present a personalized plan with your options and suggest a solution.  One solution is a consumer proposal. It’s a legally binding document that can only be submitted by a LIT and can reduce your debt by up to 80%.

If your debt has become too much to manage, you might think that bankruptcy, a consolidation loan, or even taking out another loan, are your only options. But more loans could make your situation worse in the long run. They can also come with high interest rates.When you meet with a LIT, they’ll review your current situation in detail and without judgment. A LIT is an expert in debt and is there to help you understand all your options so you can make a decision that will help improve your situation and not make it worse.

LITs help people who are having problems repaying their debts with practical advice and debt-relief solutions. LITs are strictly regulated by the Canadian government and the only professionals licensed to reduce debt and debt payments, stop interest, and stop collection calls with solutions such as consumer proposals and bankruptcies.Debt consultants are unregulated advisors and charge a fee for their services. They do not have to meet strict legislative requirements, and are not required to have any formal training to provide their services. They also charge for information that you can get free from a LIT. Debt consultants can’t file consumer proposals or bankruptcies.

LITs are not allowed to set their own fees or rates, unlike lawyers. They must follow strict government-regulated rules when handling and being paid for managing a consumer proposal or personal bankruptcy.You don’t directly pay a LIT. That means that any consultation or phone call, as well as any ongoing support, it’s included and you won’t get a bill for it.

Making the decision about who will help you take control of your debt is an important one. It involves feeling comfortable and confident in your LIT’s scope of services, capabilities and ability to provide support. Some things to help you choose the best fit for you are:

1. Look at online reviews to see how other clients rate your LIT’s services. The highest Trustpilot score is 5.0. With over 5,000 reviews, we’re proud to have received a score of 4.9.
2. Take full advantage of your free consultation to get all the information you need to understand your options.
3. Ask yourself how the people you talked to make you feel? Do you feel like they listened and understood your situation? Do you feel relief and feel confident to move forward?