How much can I settle my debt for in Canada?
Informal settlements commonly range from 50 to 80 cents on the dollar for unsecured debt, depending on the creditor and how overdue the account is. A consumer proposal through a Licensed Insolvency Trustee often settles for less and is legally binding on all unsecured creditors.
Is debt settlement the same as a consumer proposal?
No. Debt settlement is an informal negotiation with individual creditors, with no legal protection. A consumer proposal is a formal insolvency process under the Bankruptcy and Insolvency Act that binds all unsecured creditors, stops garnishments, and is administered by a Licensed Insolvency Trustee.
Does debt settlement hurt my credit?
Yes. Settled accounts are typically reported as "settled for less than the full amount," which is a negative mark. A consumer proposal is noted as an R7 rating and stays on your credit report for three years after completion, or six years from filing, whichever is earlier.
Are debt settlement companies regulated in Canada?
For-profit debt settlement companies are regulated provincially and cannot legally file insolvency proceedings. Only a Licensed Insolvency Trustee, regulated federally by the OSB, can administer a consumer proposal or bankruptcy. Be cautious of high up-front fees charged by unregulated firms.