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Are License Insolvency Trustees Better Than Credit Counsellors And Why?

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Understanding Licensed Insolvency Trustees

If you are struggling with debt and unable to pay your creditors as your bills become due, a Licensed Insolvency Trustee (LIT) can help. These are individuals who have gone through specific training and are licensed to provide advice to individuals and businesses who are having debt problems as well as administer legal processes designed to resolve debt issues.



Licensed Insolvency Trustees were formerly known as Bankruptcy Trustees. However, this term was retired as it did not properly reflect the services provided by LITs. However, LITs are the only professionals who are allowed to administer bankruptcy and consumer proposal processes in Canada.

When you meet with a trustee, he or she will review your financial situation and provide you with details on the options available to you. You do not “hire” a trustee, but you instead choose a trustee who you wish to work with. Most trustees offer an initial consultation at no charge. Referrals are not necessary to see a trustee.

While LITs work with bankruptcy firms and companies, they are individuals who are responsible for specific insolvency processes. For instance, if you contact a trustee and determine that filing a consumer proposal is the best course of action for your situation, the proposal will be assigned to that specific trustee.

Licensed Insolvency Trustees are officers of the court. This means that they are independent professionals who are separate from both the government and the creditors. Licensed Insolvency Trustees are bound by a strict code of ethics and have the duty to ensure that all stakeholders in an insolvency process are treated fairly. This means respecting the debtors who filed, the creditors, and the greater insolvency system. Trustees who do not follow this code could put their personal license at risk.

If a trustee administers a legal insolvency process (such as a bankruptcy or consumer proposal) their fees are paid by the creditors involved in the process. The formula established for how fees are handled is that government fees are paid first, then trustee fees, then payments to creditors.

How Do Licensed Insolvency Trustees Differ from Credit Counsellors?

As mentioned, Licensed Insolvency Trustees are federally-regulated professionals. They are subject to ongoing oversight by the Office of the Superintendent of Bankruptcy and must adhere to the federal Code of Ethics for Trustees. Trustees are required to provide debtors with information on all possible debt-relief options, even those they do not administer, and bound to ensure that all stakeholders in an insolvency process are treated fairly.



Credit counsellors are typically qualified financial professionals who can share budgeting and money management strategies with people who are struggling financially. Both not-for-profit organizations and for-profit companies offer credit counsellors. It is important to do research before agreeing to work with a credit counsellor. This means finding a trustworthy organization that is in good standing with a provincial or national association, as well as a qualified counsellor. Credit counsellors aren’t legally required to have any specialized training, though some do.

Different credit counsellors will offer different services and will charge different fees depending on what they offer. For instance, a counsellor may attempt to contact creditors on a debtor’s behalf and attempt to negotiate a settlement, a payment plan, or a lower interest rate. Note that you may still be required to pay a fee even if your creditors refuse to negotiate with the credit counsellor.

Working with Licensed Insolvency Trustees

As mentioned, most trustees will offer the initial consultation at no charge. During this consultation, they will review your situation and provide you with details on all the options that are available to you. It is then your decision as to how you will proceed. The fees charged by a Licensed Insolvency Trustee for consumer insolvencies are regulated by the federal government.

If, after meeting with a trustee, you determine that filing a consumer proposal or declaring bankruptcy is the right option for you, the trustee will ensure that all required paperwork is completed and filed. The trustee will be responsible for all communication with your creditors.

Bankruptcy and consumer proposals are legal processes. This means that, once they have begun, unsecured creditors are not legally able to contact you nor are they able to take any action to collect the debts owed. For more information, please contact us today.

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