How Bankruptcy in Canada Works & The Role of the Licensed Insolvency Trustee
Many Canadians struggle with debt. Unfortunately, when you have a lot of debt, it can be very difficult to pay it down. This is especially true in the case of credit card debt and other high-interest debts. If you’re paying a lot of interest on your debt, every month that you can’t pay off the full balance means you’ll owe even more in interest. This can be a frustrating situation.
The Licensed Insolvency Trustee seems to be the only solution
Some people who have this problem may feel like it’s hopeless and there’s no solution. The good news is that’s not true. Speaking with a Licensed Insolvency Trustee can help.
What is a LIT or an Insolvency Trustee licensed by the federal government?
A Licensed Insolvency Trustee (LIT) is a person who has received special training and is licensed by the federal Office of the Superintendent of Bankruptcy (OSB) to provide people with details on debt relief options and to administer certain insolvency proceedings. A trustee is the only person who can administer consumer proposals and bankruptcy in Canada.
Is bankruptcy a bad solution for me?
Many people panic when they hear the word “bankruptcy.” However, rather than immediately dismiss the process, it’s important to learn about bankruptcy in Canada and then, once you have the details, you can make an informed choice as to whether the process is right for you. Meeting with a Licensed Insolvency Trustee is a good start.
They can provide you with the information you’re looking for, answer any questions you may have, and administer the process if you decide to proceed.
What a Licensed Insolvency Trustee Does
One of the biggest problems that many people who have debt struggle with is not knowing what their options are. This is one role that a Licensed Insolvency Trustee serves. Most trustees offer an initial consultation where you can have your situation reviewed at no charge. During this consultation, the trustee will give you information on the debt relief options that are available to you.
A Licensed Insolvency Trustee is required to provide information on all possible options, not just those that the trustee is licensed to administer. This is different from some other financial professionals who may only provide details on the processes they are most familiar with.
If you choose to proceed with a consumer proposal or bankruptcy in Canada, the trustee will administer the process. The bankruptcy process begins with the trustee completing the required forms and filing the bankruptcy with the Office of the Superintendent of Bankruptcy.
From this point, the LIT will be responsible for communicating with your unsecured creditors. Once you file, they are not able to take any legal action against you, and any collection actions (wage garnishment, etc.) that have already started must stop.
Do I lose everything if I file for bankruptcy?
The LIT is also responsible for ensuring that you are able to keep all assets that are deemed exempt from the bankruptcy process. It is a common misconception that you lose everything you own when you file bankruptcy in Canada. This is untrue.
The process is not designed to punish you. It has been created to allow those who are unable to pay their debts as they become due to a chance to eliminate these debts and start fresh. This is why each province and territory in Canada allows those who file for bankruptcy to keep certain assets that are deemed necessary to live a basic life.
The Licensed Insolvency Trustee will let you know which assets you will be able to keep (most people can hold onto all or nearly all of their assets) and ensure that exempt assets are kept exempt from the process.
Depending on your situation, your income, and other factors, you may be responsible for making payments to your creditors during the bankruptcy. The trustee will inform you if this is the case and all payments will be made to the trustee who will then distribute them to your creditors.
In most situations, a person is automatically discharged from bankruptcy in Canada nine months after filing, if it is their first bankruptcy, and they have completed their duties as required. The Licensed Insolvency Trustee will let you know what is required of you during the bankruptcy process. Once you have been discharged from bankruptcy, you are free to start rebuilding your financial life.
For more information on the process of bankruptcy in Canada, contact a Licensed Insolvency Trustee today.