Do LITs Offer Debt and Insolvency Counselling?Nov 21, 2018
Are you looking into filing for insolvency, but not sure what to expect? November is Financial Literacy Month in Canada, which is why we wanted to talk about debt, insolvency and what counselling LITs offer during such process.
How to make that first step
Personal injury, medical emergency, job loss, divorce, mounting bills…there are many things that can lead to a financial crisis. When debt becomes out of control, insolvency may be the best option to help you get back on your feet. Once you’re ready to make that first appointment with a Licensed Insolvency Trustee, here’s what you can expect:
- Your first appointment is a no-cost, no-obligation, info session. Your LIT will explain the services they offer and answer any questions you may have.
- You will be asked about your income, financial situation and debts. From there, your LIT will give you a list of available options.
- You have the final say in which option you choose. You can take some time to think about it, or review your other options.
What does the insolvency process look like?
During a consumer proposal or bankruptcy, your LIT works on your behalf by dealing with your creditors so you don’t have to. Before filing for bankruptcy, your LIT requires you to submit a personal budget. This is used to determine:
- Whether budgeting and cutting expenses may be enough to help you avoid a bankruptcy.
- Whether bankruptcy is necessary (bankruptcies are last resort options) or whether you are able to afford a consumer proposal, which would require you to make payments to your creditors, through your LIT each month.
- Whether you will need to make surplus payments during the bankruptcy process.
Regardless of whether you’re filing a consumer proposal or bankruptcy, from the day you file, all legal actions against you will cease, along with harassing phone calls and wage garnishments. For more information about the consumer proposal and bankruptcy process, click here.
Is counselling mandatory during the insolvency process?
In addition to your LIT’s guidance throughout the insolvency process, you will also be required to attend two sessions with a credit counsellor. This is one of the last steps in the insolvency process, but it is required in order to be discharged from your debt. Credit counselling is made mandatory to ensure that upon discharge, you can take control of your finances by:
- Rebuilding credit over time – This can be done by applying for a secured credit card and using it for small payments or monthly bills, which can be easily paid off. Over time, your credit score will positively reflect your efforts and you will be able to get other forms of credit.
- Following a budget – Having and following a budget will allow you to predict expenses and track your money to help live within your means. Use this budget calculator or budget worksheet to get started.
- Living within your means and avoiding debt in the future – Being mindful with your purchases is a good way to keep expenses low and avoid impulse spending.
- Saving for the future – An emergency fund is a necessary part of staying debt free. It will keep you from dipping into debt when unexpected costs arise.