Understanding the Role That Licensed Insolvency Trustees Play
You may have heard of Licensed Insolvency Trustees before, but you might also be wondering exactly what they do. A Licensed Insolvency Trustee (LIT) is a financial professional who provides services and advice to people and businesses that are experiencing debt problems. Trustees have received specific training and are licensed by the federal Office of the Superintendent of Bankruptcy (OSB).
Only people who have completed the required training and are licensed can call themselves Licensed Insolvency Trustees and provide the services of a trustee.
Prior to December 2015, LITs were commonly known as “Bankruptcy Trustees.” However, since that time, the Office of the Superintendent of Bankruptcy stated that these individuals are to use the term “Licensed Insolvency Trustees” and that the bankruptcy trustee term has been retired.
A big reason for this change is that the former term did not accurately describe the services that LITs provide. One service provided by trustees is administering bankruptcy proceedings, but it is not the only service they offer.
The Services that Licensed Insolvency Trustees Provide
Licensed Insolvency Trustees are there to help people make informed choices about their financial situation. The information that LITs provide can help people deal with financial difficulties and make the right decision to improve their financial health.
When you meet with a LIT, they will review your financial situation and then provide you with details on the options available to you to improve your finances and reduce your debt. Trustees are federally regulated and required by law to give you information on all possible options, not just those that they themselves administer.
Licensed Insolvency Trustees are the only professionals who are authorized to administer government-regulated insolvency proceedings. These processes are designed to allow people to legally discharge themselves from debt. Two of these processes are consumer proposals and bankruptcy proceedings.
- Consumer Proposal
- A consumer proposal is a legal process where you make an offer to all your unsecured creditors to repay a portion of your debt in exchange for the remaining debt being discharged.
- This option is a common one for people who are able to repay some of their debt, but not the full amount.
- If you choose to proceed with this option, the trustee will develop a proposal that they believe is fair based on your financial situation and your debt. This proposal is then presented to your unsecured creditors who will vote on it.
- If the creditors who are owed the majority of the debt choose to accept the proposal, all are bound by its terms.
- If the proposal is accepted, regular payments are made to the trustee who then uses this money to pay the creditors. All communication is handled by the trustee and the unsecured creditors are not able to take any actions to collect the debts once the proposal is filed.
- Bankruptcy is also a legal process. It is designed to give people who are struggling with debt and unable to pay it back with an option to discharge these debts and receive a fresh start.
- If you decide that filing for bankruptcy makes sense to you, the trustee will work with you to complete the required forms and file these documents with the OSB.
- The trustee will inform your creditors of your bankruptcy and will be responsible for dealing with your creditors on your behalf. Unsecured creditors are not legally allowed to make attempts to collect the debt once the bankruptcy paperwork has been submitted.
- The LIT may also sell some of your assets and use the money raised from the sale to pay your creditors. However, various assets are exempted from this process by provincial and federal laws. This is done so that the bankruptcy process does not leave you with anything. You will be able to keep assets deemed necessary to live a basic lifestyle.
- Depending on your income, you may be required to make “surplus income payments” to the trustee who will then distribute this money to your creditors. The trustee will inform you if this is required.
Most Licensed Insolvency Trustees offer a free consultation where you can talk about your financial situation and have your circumstances reviewed. In addition, the fees charged by the trustee for administering any legal processes are taken from the payments made to your creditors if you proceed with a bankruptcy or consumer proposal. These fees are regulated by the federal government.