When you're dealing with serious debt in Canada, you may encounter two distinct types of professionals: credit counsellors and Licensed Insolvency Trustees (LITs). Both can help — but they offer very different services, operate under different regulations, and are appropriate for different situations.
Credit counsellors — especially those at non-profit agencies — provide financial education, budgeting help, and negotiate Debt Management Plans (DMPs) with creditors. A DMP involves the credit counsellor negotiating with your creditors to reduce or eliminate interest while you repay 100% of the principal, typically over 3–5 years.
Non-profit credit counselling agencies in Canada include Credit Counselling Society, Money Mentors (Alberta), and various regional agencies. Some for-profit "credit counsellors" also operate — be cautious of high fees.
An LIT is a federally licensed professional who can administer consumer proposals and bankruptcies under the BIA. They can legally settle debts for less than 100 cents on the dollar, provide a legal stay of proceedings, and administer a structured process that is binding on all creditors.
| Factor | Credit Counsellor (Non-profit) | Licensed Insolvency Trustee |
|---|---|---|
| Regulated by | Provincial bodies; varies by province | Federal government (OSB) |
| Can file consumer proposals | No | Yes |
| Can file bankruptcies | No | Yes |
| Debt reduction | No — 100% of principal repaid | Yes — potentially 20–70% of debt |
| Interest reduction | Often yes — through DMP negotiations | Interest stops on insolvency filing |
| Stay of proceedings | No legal stay | Immediate legal stay under BIA |
| CRA debt | Limited ability to negotiate | Can include in proposal/bankruptcy |
| Duration | 3–5 years (DMP) | Consumer proposal up to 5 years; bankruptcy 9–36 months |
| Credit report impact | Noted; removed 2 years after completion | R7 (proposal) or R9 (bankruptcy) |
| Initial consultation | Usually free | Always free |
| Cost structure | Monthly admin fee ($25–$50/month) | Regulated fees from proposal payments or estate |
A Debt Management Plan through a non-profit credit counsellor makes sense when:
You should consult an LIT when:
Yes — and it's encouraged. Many LITs are happy to tell you if a DMP through a credit counsellor would be a better option for your situation. Get consultations from both before deciding. There is no obligation to proceed with either.
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