Money Mentors is the trade name for Credit Counselling Services of Alberta. This is the organization that administers the Orderly Payment of Debt (O.P.D.) program in Alberta for the provincial government. O.P.D. is a program available in only 4 Canadian provinces to help people settle their debts without going bankrupt.
Money Mentors is designated as a not-for-profit credit counselling agency. As a not-for-profit they don’t pay income taxes on business income they earn, doesn’t mean they don’t earn income or it is a free service. The O.P.D. program is not a free service as many suspect, nothing in life is free as we know. Money Mentors offer classes and seminars on budgeting that can be beneficial to consumers.
Orderly Payment of Debt clients must pay back 100% of their debt to their creditors with an interest rate of 5% per year, which is lower than bank rates. Traditionally, Money Mentors takes the view that you ought to be able to pay off your debt within 3 years, but we see people that have been on longer programs of 4 years. As O.P.D. is regulated under the Bankruptcy and Insolvency Act, it does affect your credit rating and works very well for people who have low debt and can afford to repay this in 4 years. If you owe $5,000.00, your monthly payment is approximately $120.00 on O.P.D. or a total of $5,760.00 over the 4 years. Most people can afford this payment and we would suggest this is exactly the right process for you.
If you owe $50,000.00, however, your monthly payment is closer to $1,200.00 per month or $57,600.00 over the 4 years including the 5% interest. This is a lot more difficult for some people to afford and at this point they need to do more research on the other options available to them.
The federal government has created a process called “Consumer Proposals” and it is administered by licensed “Insolvency Trustee’s”. Much like a dentist does more than just pull teeth; their goal is always to try to fix the problem before the last resort of bankruptcy or pulling a tooth. In a Consumer Proposal, a debtor (the person who owes the money) can “propose” to their creditors that they will pay back their debt based on their ability to pay. A Proposal can offer to repay debts in full, without interest, or for a discounted percentage, as long as the Proposal offers more money as compared to a bankruptcy. We have done some Proposals as low as 5 cents on the dollar. (On a $50,000.00 debt this would be $2,500.00). These Proposals take into consideration the debtor’s needs first and if there is some ability to repay debt, the Trustee can find a solution that will work for the debtor while at same time provide the creditors with a superior recovery. These plans are created with no interest and the repayment period can extend over a 5 year period instead of 3 – 4 years, therefore, the monthly payment is always less than O.P.D. So if we take the above scenario of a $50,000.00 debt and if the debtor wants to offer 100% repayment, you would save the 5% interest per year as compared to O.P.D., which is $7,600.00 and your payments would be $833.33 over 5 years. This is easier to afford. If you can reach a settlement with the creditors at 50%, you would pay back $25,000.00 over 5 years or $416.00 a month. A lot easier to afford. There are no additional fees in a Proposal and you receive protection from the creditors which prevents them from commencing or continuing any legal action. What you agree to pay is what you pay. Trustees get paid from the Proposal and you do not pay any additional funds for the Trustee’s services. Essentially they are the collectors for the creditors and they are helping them recover something as opposed to possibly nothing in a bankruptcy. This process was set up by the federal government in 1992 to help the honest debtor to get a fresh start, not to abuse the system.
The most important thing to remember is that at the end of the day the result is the exactly same, the debt is gone and you can move forward with your life. The only thing that differs is how much you paid out of your hard earned money to get the same result. Pay $57,600.00 or pay $25,000.00, that is an easy decision. It has exactly the same effect on your credit bureau rating.
So why do consumers do the O.P.D. program at Money Mentors? For the most part banks and creditors will refer you to O.P.D. if you no longer qualify for additional credit or if you are unable to qualify for a consolidation loan. They won’t generally refer you to a Trustee because they know they may receive less recovery of their debt. Good for the creditors, maybe not so good for you and your family. Consumer Proposals are only available through a licensed Trustee, not through Money Mentors. You need to know where to go.
Another important thing to remember here is that this program is administered by “Licensed Insolvency Trustee’s”, formerly Bankruptcy Trustees. These are highly educated, highly regulated individuals like lawyers and accountants. People who specialize in this area. You can’t just decide to work in this industry and say you are going to help people with their debt. Be sure you are dealing with the professional and not a “Debt Settlement” or “Credit Counselling Agency” that isn’t licensed to do this. At the end of the process they have no guarantee that your debt will be gone. You may be back at square one looking for a Licensed Trustee to get the job done right.