As of April 1, bankruptcy trustees are now known as licensed insolvency trustees. The Office of the Superintendent of Bankruptcy Canada, the division of the federal government that regulates trustees, changed the name to emphasize that trustees now file more consumer proposals than bankruptcies, so the term “insolvency” is more reflective of the debt relief services provided by trustees. The new term “licensed” is also important to help individuals struggling with debt to easily identify those who are licensed to administer bankruptcies and consumer proposals.
What’s a licensed insolvency trustee?
Regulated and licensed by the federal government, licensed insolvency trustees are licensed professionals that have gone through vigorous training and years of schooling to be able to administer consumer proposals and bankruptcies. Both are legal proceedings under the Bankruptcy and Insolvency Act that allow debtors to get out of debt. This makes the trustee an Officer of the Court, and the only licensed debt professional who can file either procedure.
While trustees are independently employed (although they may be a part of a partnership or firm), they are tasked by the government to be fair and balanced in their filings. They don’t favour one party over the other, nor would they recommend a solution that’s not in the best interest of the debtor. In addition, all trustees’ fees are regulated by the government and are included as part of the payments in a bankruptcy or consumer proposal.
What do they do and what debt relief services do they offer?
While their name has changed, what licensed insolvency trustees do hasn’t changed. They still meet with individuals struggling with debt to help them find the best solution for their situation. In fact, licensed insolvency trustees provide a number of debt relief services:
- Consultation—Your initial meeting with a trustee is free. He/she will review your financial situation and your debts to help you determine the best course of action. For some, that may be a bankruptcy or consumer proposal, while others may need help identifying issues with their budget. If you do file bankruptcy or a consumer proposal, you’ll also receive two credit counselling sessions.
- Bankruptcy—Based on your debts, assets, and income, your trustee may suggest filing for personal bankruptcy. The trustee will contact your creditors and handle the proceedings, as well as guide you through the process to ensure your successful discharge.
- Consumer proposal—If you have equity in a property or other asset, or a higher income, your trustee may suggest a consumer proposal. In a proposal, you offer your creditors slightly more money than they would receive from a bankruptcy, while allowing you to keep your home and vehicle and arrange a lower monthly payment. Creditors have one vote for every dollar that you owe, and debtors need to have a majority of the creditors vote in favour of the proposal for it to be accepted. The maximum proposal period is five years, but your creditors can be paid off sooner. Similar to the bankruptcy process, the trustee will contact your creditors, handle proceedings, record votes from creditors, and guide you through the process to ensure your success.
Why should you choose a licensed insolvency trustee?
Only a licensed insolvency trustee can file a bankruptcy or a consumer proposal—legal insolvency services that provide true debt relief. A consumer proposal or bankruptcy administered by a trustee provides the debtor with legal protection against wage garnishment and the seizure of their bank accounts. Any program managed by someone who’s not a licensed insolvency trustee offers no legal protection to the debtor.
As mentioned earlier, your first meeting with a trustee is always free. He/she simply goes over your finances and debts, and provide options for debt relief. Trustees don’t charge any upfront fees. If someone is charging you a fee to discuss your debt, you’re not meeting with a licensed insolvency trustee and they’re not able to file a consumer proposal or bankruptcy on your behalf.
So if you’re struggling with debt, don’t be afraid to contact a licensed insolvency trustee directly to discuss your options. He or she will be able to provide you with different choices and give you the time you need to make an informed decision that’s right for you.
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