If you take some time to browse www.4pillars.ca you will notice that we proudly claim to possess a 97% success rate with all our restructuring programs. This number isn’t an accident. It’s the result of a commitment and concerted effort to counter the average success rate within the debt restructuring industry which unfortunately rests at around 65%, at best – 35% at worst!
Achieving a 97% success rate, the best in all of Canada, requires the consistent application of a proven system. Each 4 Pillars office is well versed in how to deliver this system to every person who becomes a client. Broadly speaking, the system may be broken up into four components.
- A commitment to the needs and education of the Debtor, not the Creditor
- Pre-work and preparation in advanced of the actual restructuring of debt
- Restructuring debt in a manner that is most advantageous for the debtor
- Providing clients with tools and support to rebuild and develop healthy habits towards personal finance
Bypassing any one of these components lowers the probability a person will successfully complete their restructuring program. In order to provide you with a greater understanding of how we help debtors, I’m going to elaborate on each component of our program.
A Commitment to the Needs and Education of the Debtor, not the Creditor
If you examine options available to debtors in the Canadian Restructuring Industry, you’ll spot a recurring theme rather quickly. Trustees in Bankruptcy, Not for Profit Credit Counsellors, and Debt Poolers all ultimately represent and look out for the needs of the Creditor.
This doesn’t mean these professionals are out to harm the debtor. Personal debt restructuring isn’t taken personally. There is no vendetta. However, everyone has a job to do and the aforementioned professionals and the organizations they represent are either legally bound to act on behalf on the creditors or their services are tailored for the benefit of the creditors.
The first step in educating our clients is helping them understand who is truly on their side and why.
Trustees in Bankruptcy
Go to the Industry Canada website, click here and lookup the definition of the Trustee in Bankruptcy. In black and white, it is clearly stated that the trustee protects the rights of the creditors and investigates the affairs of the debtor. The Trustee must make sure the debtor’s rights aren’t abused, but that’s where help for the debtor begins and ends.
In the pamphlet Dealing With Debt, produced by Industry Canada, on page 16 you’ll see the following…
“The Trustee represents your creditors and is an officer of the court”
This doesn’t mean the trustee has ill intent towards the debtor. The trustee’s job though is to work through the Bankruptcy and Insolvency Act in order to make an arrangement that is most beneficial to the creditors. Furthermore, as trustees do not Act on behalf of debtors, any debtor working directly with a trustee is at a disadvantage when it comes to knowledge of the Bankruptcy and Insolvency Act.
Would You Go to Court Alone?
Imagine going to court without a lawyer. By law, you don’t need a lawyer to represent you in court, and yet the vast majority of people who find themselves in court utilize the services of a lawyer. Why? After all, written law is not hard to find. Any person in Canada may enter a law library and pick any book off the shelf. Laws are public, and we all have access to information pertaining to these laws.
The reality though is that even the most studious individual does not possess the knowledge and wisdom that comes with experience of having dealt with the court system on a regular basis. Someone who enters a court of law without a lawyer is almost always at a disadvantage because he/she doesn’t know what they are permitted to do, how to present their side of the story, and what is truly in their best interest.
Moreover, don’t count on the judge to help you out! Judges are not permitted to act on behalf of defendants. Trustees are much the same way. You may think of them as similar to judges as they are officers of the court and represent the Bankruptcy and Insolvency Act. The primary difference though between a judge and a trustee is the judge is actually mandated and financially incentivized to remain neutral. Trustees are mandated to represent the creditors and are financially incentivized to obtain as much money as possible from the debtor.
4 Pillars levels the playing field in Canada by working for the sole benefit of you, the debtor.
Do Trustees work for free?
Trustees are paid through what’s known as Tariff. When a debtor goes Bankrupt or files a Consumer Proposal, a certain amount of money is paid to the creditors through the trustee. By law, the trustee is entitled to a portion of the money being paid to the creditors.
The more a debtor pays into his/her Bankruptcy or Proposal, the more the trustee is allowed to collect.
Unlike a judge who is paid a salary by a province or municipality, and is thus effectively neutral (at least from a financial point of view) the trustee has an incentive to collect as much money as possible from the debtor. Moreover, this money that comes from the debtor is meant for the creditors. As a result, the Trustee is effectively being paid by the creditors as it’s their money he is placing a tariff upon.
This arrangement is detrimental to debtors, especially in the case of Consumer Proposals. Industry Canada reports that approximately 35% of all Consumer Proposals filed directly through Trustees in Bankruptcy end up being annulled as debtors are unable to keep up with the monthly payment obligations.
Not for Profit Credit Counsellors
Not for Profit Credit Counsellors are in effect an extension of the creditors. Banks and other financial institutions support these organizations by promoting them and supporting them financially. Credit Counselling is a means for creditors to dissuade debtors from seeking out methods to cut their debt through the Bankruptcy and Insolvency Act.
Credit Counsellors don’t reduce your debt!
Credit Counsellors do not actually cut debt. People seeking help will notice immediately that the amount of debt they owed before meeting with the Credit Counsellor is exactly the same (actually more) when they leave the Credit Counsellor’s office.
Credit Counsellors are extensions of the banks and other lenders.
Their goal in setting up Credit Counselling services is to recoup all of their money. It makes sense. If you owned a bank that was owed money you would certainly want all your money back! For banks, the Bankruptcy and Insolvency Act is a means for debtors to reduce the amount they owe, so the last thing they want is for someone who owes them money to declare Bankruptcy or file a Proposal.
Are there financial benefits to using a Credit Counsellor?
If you owe $30,000 on credit cards and seek help through Credit Counselling, you will likely find the Counsellor can arrange a plan that is better than what you are currently facing. After all, if you owe $30,000 on credit cards you are likely paying anywhere between $750 and $900 per month, just to keep the creditors off your back. That’s almost ALL interest, and your debt goes nowhere.
In the best case scenario, the Credit Counsellor will be able to arrange a payment plan where you pay 100% of your debt back, plus interest, over a Five year period. What will the rate of interest be? Well, we don’t know that until the Counsellor negotiates with each creditor. On average, you’re looking at a rate somewhere between 1% and 12%. Let’s split the difference and go with 6%.
A debt of $30,000, spread over 5 years, at 6% interest works out to a monthly payment of $580.
Ok, that’s better than the $750-$900 you were paying previously, but are you better off?
Granted, each case is different, but the statistics don’t lie. Most people in this situation are certainly not better off as 65% of people who participate in Credit Counselling fail. That is, they are unable to keep up with the monthly payments.
For the majority of people, trying to pay back 100% of what’s owed, plus interest, in a time frame of 5 years (sometimes 3 years!) is simply not feasible. If you find that info troubling, it gets better. The figures above don’t include the fees that are charged on top of the monthly payment. These fees are rarely less than $50 per month. A monthly charge of $50 works out to $3,000 over five years!
Not For Profit = Free, right?
If you have previously done any research on Credit Counselling you may be surprised by that last paragraph. After all, aren’t Credit Counsellors Not for Profit?
Yes, they are. However, Not for Profit should not be confused with “Free”. The term Not for Profit simply means that the purveyors of Credit Counselling are not showing a profit at the end of the year, and are entitled to tax exempt status. This is similar to a charity, and charities don’t ask for donations of $0.00!
Of course, not showing a profit doesn’t mean money isn’t made. People still have to be paid, offices, phones, computers, etc. all have to be taken care of, and the owners and shareholders (yes, they exist!) have to be paid as well. Many people erroneously assume that a Not for Profit organization is looking out for their best interests. In reality, the Not for Profit Credit Counsellors are looking out for the people you owe, and making money on your monthly payments. There’s nothing wrong with an organization making money, but the motivations of the organization are not clear to the majority who opt for this service.
Here’s some other information you may find surprising. Not for Profit Credit Counsellors often receive a payment or ‘kick back’ from the banks for helping the banks recoup most or all of the money owed to them. This is additional revenue for the Counsellors, and the banks now get to write off this kick back as a charitable donation. After all, the payment was made to an organization that is Not for Profit!
A 65% failure rate is clearly the product of a service that is not tailored to the needs of the debtor. Furthermore, Credit Counsellors cannot address certain debts, such as tax or student loan debt.
If for some reason you don’t qualify for Credit Counsellors – they will ultimately send you directly to a Trustee. It’s clearly a creditor driven relationship where both look after the best interests of your creditors.
Debt Poolers
I won’t spend too much time on Debt Poolers as their operation is very similar to that of the Not for Profit Credit Counsellor. In a nutshell, Debt Poolers buy people’s debt and then arrange a monthly payment plan for them. Just like the Not for Profit Credit Counsellor, the debtor finds him/herself with a payment plan that is usually unmanageable in the long run.
The primary difference between the Debt Pooler and the Credit Counsellor is the Debt Pooler is a For Profit organization and tends to be more upfront about the fees being charged. In many cases the monthly payments and the fees result in the debtor paying back 110-115% of what’s owed.
4 Pillars
4 Pillars represents the Debtor, period. Our obligation is to help our clients find the most effective method to get out of debt and keep payments low and manageable. We specialize in debt restructuring, which is another way of saying “cutting debt”. In almost all cases we help consumers avoid bankruptcy where possible.
Our methods are varied. Most of our restructuring solutions utilize the Bankruptcy and Insolvency Act where we work with our clients and prepare their files in order to ensure they have the greatest chance of achieving a repayment plan that is manageable. We work alongside trustees but represent our clients’ interests and advocate for them. I often like to tell my clients that I’m the debt version of a lawyer, even though I’m not a lawyer at all. I’m their representative, their expert in the Bankruptcy and Insolvency Act, and the one who will fight for their deal.
It Starts with Education
Before we even get into the nitty gritty of building a file and doing the pre-work that helps make our restructuring programs successful, we must first take the time to educate our clients. In order for our clients to make an informed decision, they need to understand not only what is available to them and how the process works, but they need to understand why certain options are applicable while others don’t necessarily fit their situation.
By reviewing options and explaining each option in detail, clients are able to gain an understanding of how each option will ultimately impact their life and their financial resources. No two cases are alike, so we take the time to review our client’s situations, understand their liabilities and assets, and structure a plan that puts them in a much better place while protecting their assets and financial future.
Don’t take our work for how good we claim to be (and we are good) visit our page of client testimonials and see for yourself we have had with clients just like you looking for help to fix their debt problems.
Author Information:
Zach Brull
Tel: 289-466-1029
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