Licensed bankruptcy trustees work through the court system via the Office of the Superintendent of Bankruptcy while credit counsellors work directly with creditors without any official sanctioning from the Canadian legal system. What this means for debtors is this: When creditors work with credit counselors and agree to whatever repayment plan the counselor is proposing, their participation is voluntary. Creditors can change their minds at any point during the life of the repayment plan and commence legal collection activities against the debtor. Such legal actions include wage garnishment, bank account attachments, and asset liens. This is not the case when you work with a bankruptcy trustee.
Bankruptcy filings or consumer proposals prepared by licensed bankruptcy trustees come with the full protection of the law. Once a debtor’s consumer proposal is accepted or a bankruptcy filing becomes official, all creditor collection underway against the debtor must stop. Creditors are prohibited by law from contacting the debtor in any way as long as the debtor is fulfilling the requirements set forth in the proposal or the filing.
The implication for a Canadian whose wages have been garnished should be obvious. Working with a licensed bankruptcy trustee can stop the garnishment and prevent further action while – with one exception – working with a credit counselor cannot. What’s the exception?
The BIA also includes a provision called an Orderly Payment of Debts (OPD), which allows qualifying debtors to repay their creditors in full at a 5% interest rate over a period of approximately 4 years. An OPD also provides legal protection. However, an OPD is only available through a non-profit credit counselor in the Provinces of Alberta, Saskatchewan, Prince Edward Island, or Nova Scotia.
You should also know that while not legally binding on a creditor, a skilled credit counselor with a history of dealing with the creditor may be able to get the creditor to withdraw the wage garnishment on a voluntary basis.