Do you need to hire a lawyer to file for bankruptcy in Canada?
You’re insolvent (unable to pay your debts) and considering filing for personal bankruptcy. But who do you call to assist you in getting the process started? Do you need to hire a bankruptcy lawyer or a Licensed Insolvency Trustee? And does it even matter?
In this article, we’ll explain the role of a bankruptcy lawyer and Licensed Insolvency Trustee in the bankruptcy process and which can best help you get the debt relief you need to rebuild your finances.
Do you need to hire a lawyer to file for bankruptcy in Canada?
The short answer is “no,” you don’t need to hire a lawyer when filing for bankruptcy in Canada. In fact, lawyers are not legally allowed to administer bankruptcies in Canada. Only a Licensed Insolvency Trustee (formerly known as a bankruptcy trustee) is authorized by the federal government to carry out a bankruptcy on your behalf.
The same restriction for lawyers regarding bankruptcy also applies to consumer proposals and division 1 proposals. Only Licensed Insolvency Trustees can administer these debt-relief programs in Canada.
Bankruptcy lawyer vs Licensed Insolvency Trustee: what are the differences?
Both bankruptcy lawyers and Licensed Insolvency Trustees play essential roles in bankruptcy. However, they differ from one another based on the services they provide.
Depending on your circumstances and needs, a lawyer may not be the best fit for the situation compared to a trustee and vice versa.
The role of a bankruptcy lawyer
Bankruptcy lawyers generally lack the qualifications to assess your finances and recommend appropriate debt relief options. And, as noted, they cannot legally administer bankruptcies and other insolvency proceedings.
However, lawyers are usually necessary when a dispute arises between you and your creditors. A case where you may want to hire a lawyer is when a creditor opposes your bankruptcy discharge. In such a scenario, you’ll need to participate in a court hearing to argue your case – your lawyer will act as your legal representative.
Trustees sometimes consult a bankruptcy lawyer if they need guidance on specific aspects of Canada’s insolvency laws. The legal system can be confusing, vague, and tricky to navigate. And since lawyers have the knowledge to interpret laws, their expertise can prove helpful to trustees in certain situations.
Similarly, bankruptcy lawyers are well-suited to act as legal advisers in corporate bankruptcy. Naturally, the consequences of insolvency for a corporation are far more complex than those for personal bankruptcy. Hence, assistance from a lawyer is often necessary in such cases.
Personal bankruptcies are typically straightforward. Therefore, a Licensed Insolvency Trustee is well-equipped to guide you through the process and help you reach a debt resolution.
In Canada, bankruptcy law is designed to help you resolve your debts without the aid of a lawyer, which helps minimize costs. Trustees’ fees are fair and reasonable, as the federal government regulates them under the Bankruptcy and Insolvency Act (BIA).
The role of a Licensed Insolvency Trustee
Licensed Insolvency Trustees are federally-regulated financial professionals who assist individuals and businesses in resolving their debt problems. As experts in all things debt-related, they can review your situation and help you explore potential solutions.
However, trustees cannot provide legal advice about your debts, only financial advice.
Apart from providing actionable financial advice, the trustee is also the only debt consultant in Canada legally allowed to administer a bankruptcy or consumer proposal. The Office of the Superintendent of Bankruptcy (OSB) grants trustees their licenses and ensures they abide by all regulations under the BIA.
What It Takes to Become a Licensed Insolvency Trustee
To become a Licensed Insolvency Trustee in Canada, an individual must complete a rigorous, multi year qualification process overseen by the Office of the Superintendent of Bankruptcy.
This process includes completing a formal insolvency education program, passing a series of written examinations, and successfully completing an Oral Board of Examination. In addition, candidates must acquire a minimum of 2,400 hours of approved, relevant insolvency work experience under supervision.
Once licensed, trustees are required to adhere to a strict Code of Ethics and are regulated by the federal government to ensure they act in the best interests of both debtors and creditors.
If you decide to declare bankruptcy, your trustee will guide you through the bankruptcy process from start to finish. Their role includes, but is not limited to, the following tasks:
- Preparing and filing the necessary paperwork
- Notifying your creditors of insolvency proceedings
- Reviewing and compiling claims made by your creditors
- Ensuring that you fulfil your duties under the BIA
- Overseeing the distribution of surplus income payments, if required
- Arranging for the distribution of your non-exempt assets to creditors
- Getting you approved for a discharge when you complete your bankruptcy
Learn more about what to expect during bankruptcy.
How to decide if you need a bankruptcy lawyer or Licensed Insolvency Trustee
There’s almost a 100% chance that a Licensed Insolvency Trustee is the only professional you’ll need to guide you through bankruptcy. Only in exceptional circumstances will you need to employ a bankruptcy lawyer.
Seek a Licensed Insolvency Trustee if:
- You’ve decided to file for bankruptcy with certainty
- You’re looking to explore the advantages and disadvantages of various debt relief options
- You’re struggling to repay your debts and need financial advice
- Your creditors are threatening to garnish your wages, freeze your bank account, or pursue other legal actions against you
Seek a bankruptcy lawyer if:
- Your creditors object to your bankruptcy discharge, and you must appear in court to defend your case
- Your financial situation is highly complex and requires extensive legal advice in addition to a trustee’s expertise
- You’ve been summoned to a meeting with your creditors and need legal guidance as to whether you must answer specific questions
- The OSB has requested a meeting with you to question you about specific details about your bankruptcy
By default, you can’t go wrong contacting a Licensed Insolvency Trustee if you’re contemplating bankruptcy or other debt solutions. Your trustee will be your primary advisor and notify you early on if your situation deserves support from a lawyer.
Get the bankruptcy help you need with David Sklar & Associates
It’s important to know that bankruptcy is not a moral failing. It’s the option of last resort for Canadians who’ve done everything they can to resolve their debts without success. Going through the bankruptcy process can give you a fresh start after dealing with so much financial stress. It allows you to eliminate debts you’d otherwise carry for the rest of your life.
At David Sklar & Associates, we’ve been helping people from across Ontario for over 20 years to conquer their debt problems through bankruptcy. And though bankruptcy is a viable option for those struggling with debt payments, it’s not the only one.
During your first consultation with us, we’ll review every debt solution available. These include a consumer proposal, the most popular alternative to bankruptcy in Canada. We can answer any debt-related questions you have. And we’ll ensure you have the information you need to make an informed choice about dealing with your debts.
Personal bankruptcy doesn’t need to be a grand mystery or something to fear. Learn more about how it works by visiting our Personal Bankruptcy page. Here, we cover everything you need to know, including how long the process takes, what debts you can discharge, and what assets you get to keep.
When you’re ready to tackle your debts, don’t hesitate to contact us to set up your free, no-obligation consultation. We’ll be by your side every step of the way as you work toward achieving financial freedom!
