Who does your taxes?
While there are a few folks who take the time to complete their tax returns all by themselves, most people opt to use an accountant. I certainly don’t blame them. Tax preparation is often more art than science, and having an amateur or passerby complete your taxes will at best produce lousy art – at worst, the result will be a complete disaster.
An astute accountant will actively seek out ways to minimize his client’s tax burden. This requires a shrewd understanding of the tax code and how it relates to the client’s unique situation. The accountant can’t lie, cheat, or steal, mind you. The creativity inherent in tax preparation comes from being able to work within the boundaries set out by the tax code, all the while looking for advantages and opportunities to reduce taxes owed. By acting as intermediaries between the client and CRA, accountants help their clients achieve optimal results.
I like the tax preparation scenario because I believe Debt Consultants have to take a similar approach to reducing debt. I’m often asked whether there is an advantage to working with a Debt Consultant. It’s easy to assume that a Debt Consultant is simply shuffling a few papers and sending clients off to a Licensed Insolvency Trustee (LIT) to have a Consumer Proposal or Bankruptcy filed.
The role of a true intermediary is not even close to that!
Imagine for a moment if CRA offered to complete your taxes for free. Would you accept their generous offer? If you haven’t completely recoiled in horror at this point, then it’s possible you’re frozen with fear. I don’t think I’ve ever met anyone who answered that last question in the affirmative, and the reason should be obvious. Simply put, CRA does not Act, Advise, or Advocate on your behalf. If CRA completed your taxes the aforementioned creative side of tax preparation would disappear. CRA would not look for applicable write offs, deductions, or deferrals. At best, CRA would look to minimize the amount of work required to complete your tax return, and a garden variety return would be the result. At worst, CRA would look to have you pay more tax. This isn’t the result of malice or hostility towards the client. Who has time for that? CRA simply has no incentive or obligation to help someone find ways to reduce their tax burden.
With Debt Restructuring, having an intermediary work on your behalf to structure a consumer proposal and carefully select the LIT can work in the same way as your accountant working as an intermediary between you and CRA. LIT’s are professionals who provide a very necessary and important service and are integral in the debt restructuring process. They’re the reason the Bankruptcy and Insolvency Act (BIA) is able to function properly. That being said, LIT’s do not exist to Act, Advise, or Advocate on behalf of the debtor and have a conflict if interest if they do so, the introduction of an intermediary helps remove this conflict by working solely for the debtor.
Debt Consultants, by acting as intermediaries, work within the boundaries of the BIA to find advantages for their clients. There are all kinds of ways to help clients save money – too many to mention here actually. However, a consultant will look at a client’s income, assets, living arrangements, budget, etc. in order to find ways to provide clients with the best arrangement possible. Like Accountants, Debt Consultants are incentivized to achieve optimal results for their clients. By working with an intermediary clients receive advice and guidance that is presented with their best interests in mind. We believe such advice is invaluable and unavailable elsewhere in the market.
When it comes to restructuring debt, intermediaries have a unique position as they are able to act solely in the interests of the debtor and can provide ongoing financial rehabilitation programs to help rebuild credit and make sure a debt plan brings long term financial goals closer vs push them further away.
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