When debt becomes unmanageable, finding reliable guidance can feel overwhelming. You may see ads for debt consultants, credit repair companies, consolidation loans, and credit counselling services, but not every debt help provider has the same legal authority.
A Licensed Insolvency Trustee, often called an LIT, is a federally licensed debt professional who can explain your debt relief options and administer legal debt solutions such as consumer proposals and bankruptcy. In Canada, only a Licensed Insolvency Trustee can file a consumer proposal or bankruptcy for you.
David Sklar & Associates is a firm of Licensed Insolvency Trustees in Ontario. We help individuals and families understand their options, deal with creditor pressure, and choose a path toward greater financial stability.
This article explains what a Licensed Insolvency Trustee does, how an LIT differs from other financial professionals, what happens during a consultation, and when you may want to speak with one.
KEY TAKEAWAYS
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What Is a Licensed Insolvency Trustee?
A Licensed Insolvency Trustee is a professional who holds a license from the Office of the Superintendent of Bankruptcy, known as the OSB. This license confirms that the trustee has met strict education, examination, and experience requirements.
LITs are the only professionals legally authorized to administer government regulated insolvency proceedings in Canada. These proceedings include consumer proposals and personal bankruptcies under the Bankruptcy and Insolvency Act.
The OSB oversees Licensed Insolvency Trustees and sets standards for their conduct. This regulatory framework helps protect people seeking debt help and ensures that LITs follow professional standards and obligations when dealing with debtors and creditors.
What Does a Licensed Insolvency Trustee Do?
A Licensed Insolvency Trustee does more than administer bankruptcy. During your first meeting, an LIT reviews your complete financial picture, including your income, expenses, assets, debts, and creditor pressure.
Based on that review, the trustee explains your available options. These may include budgeting changes, debt consolidation, credit counselling, a consumer proposal, bankruptcy, or another appropriate solution.
If you decide to file a consumer proposal or bankruptcy, your LIT prepares and files the required documents, communicates with creditors, manages the legal process, and ensures the proceeding follows the requirements of the Bankruptcy and Insolvency Act.
Does Seeing a Licensed Insolvency Trustee Mean You Have to File Bankruptcy?
No. Meeting with a Licensed Insolvency Trustee does not mean you have to file bankruptcy. It simply gives you the opportunity to understand your options from a federally regulated professional.
Many people are surprised to learn that bankruptcy is not the only solution an LIT can discuss. Depending on your income, assets, debts, and goals, a consumer proposal or another debt solution may be more appropriate.
At David Sklar & Associates, the goal of the consultation is to help you make an informed decision. You should leave the conversation understanding your choices, the possible consequences, and the next steps available to you.
How Does a Consumer Proposal Work?
A consumer proposal is a legally binding agreement between you and your unsecured creditors. It is filed through a Licensed Insolvency Trustee and allows you to offer to repay part of what you owe, extend the time to repay, or both.
A consumer proposal can last up to five years. Once it is filed, a legal stay of proceedings takes effect. This stops most unsecured creditors from continuing collection calls, wage garnishments, lawsuits, and other collection action.
Interest stops accumulating on the debts included in the proposal. If creditors accept the proposal and you complete the required payments and counselling sessions, you are legally released from the unsecured debts included in the proposal.
Many people choose a consumer proposal because it allows them to deal with unsecured debt while keeping assets such as a home, vehicle, and registered savings, as long as they continue making any required payments on secured debts.
Who Qualifies for a Consumer Proposal in Canada?
To file a consumer proposal, you must be insolvent and your total debts must not exceed $250,000, not including debts secured by your principal residence. If your debt is above that limit, a Licensed Insolvency Trustee can explain other options, such as a Division I proposal or bankruptcy.
Your trustee will also review whether a consumer proposal is practical based on your income, assets, household budget, and what your creditors would likely receive if you filed bankruptcy instead.
Because every situation is different, the best way to understand whether you qualify is to speak with a Licensed Insolvency Trustee directly.
When Should You Contact a Licensed Insolvency Trustee?
You may want to contact a Licensed Insolvency Trustee if you are unable to keep up with your monthly debt payments or you are relying on new credit to pay existing debts.
Other warning signs include collection calls, wage garnishment, tax debt, payday loan use, maxed out credit cards, missed payments, or feeling unsure how you will cover basic living expenses and debt payments at the same time.
An early conversation can help you understand your options before your situation gets worse. Waiting too long can reduce your flexibility and increase the stress caused by interest, penalties, and creditor action.
What Happens When You Meet With a Licensed Insolvency Trustee?
Your first consultation is usually a conversation about your financial situation. You do not need to have everything perfectly organized before reaching out.
The trustee will typically ask about your income, household expenses, assets, debts, creditor pressure, and any urgent issues such as wage garnishment or legal action.
Helpful documents may include recent pay information, a list of debts and creditors, mortgage or rent details, vehicle loan information, collection letters, and a rough monthly budget. If you do not have everything ready, you can still start the conversation.
How Is a Licensed Insolvency Trustee Different from a Credit Counsellor?
Credit counsellors and Licensed Insolvency Trustees both help people with debt problems, but their roles are different. A credit counsellor can help you create a budget and may arrange a debt management plan with creditors.
A credit counsellor cannot file a consumer proposal or bankruptcy. Only a Licensed Insolvency Trustee can administer those legal processes and provide the legal protection that comes with filing under the Bankruptcy and Insolvency Act.
If you need protection from creditors, such as stopping a wage garnishment, lawsuit, or collection action, an LIT is the professional who can explain whether a consumer proposal or bankruptcy may help.
Licensed Insolvency Trustee vs Other Debt Help Options
The table below shows how a Licensed Insolvency Trustee compares with other common sources of debt help in Canada.
Professional | Budget help | Creditor negotiation | Can file a consumer proposal | Can file bankruptcy | Legal protection from creditors |
Licensed Insolvency Trustee | Yes | Yes | Yes | Yes | Yes |
Credit counsellor | Yes | Yes | No | No | No |
Debt settlement company | Sometimes | Sometimes | No | No | No |
Bank or lender | Limited | No | No | No | No |
Be Careful When Comparing Debt Help Companies
Some companies advertise debt relief services but are not Licensed Insolvency Trustees. They may charge fees to refer you to an LIT, or they may suggest debt settlement options that do not provide the same legal protection as a consumer proposal or bankruptcy.
Before paying any company for debt help, confirm whether you are dealing directly with a Licensed Insolvency Trustee. You can also use the OSB’s public search tool to confirm whether a person ot the Company they work for is licensed to administer bankruptcies and proposals.
Working directly with an LIT helps ensure that you are speaking with a regulated professional who can explain all formal insolvency options and file the legal documents if you choose to proceed.
What Are the Benefits of Working with a Licensed Insolvency Trustee?
Working with an LIT offers several important benefits. First, LITs are federally regulated and must follow professional standards enforced through Canada’s insolvency system.
Second, an LIT can explain both formal and informal options. You are not limited to one product or service. The recommendation should be based on your income, assets, debts, budget, and goals.
Third, if you file a consumer proposal or bankruptcy, you receive legal protection from most unsecured creditors. Collection calls stop, interest stops on included debts, and creditors cannot continue most legal collection action against you.
How Do Licensed Insolvency Trustee Fees Work in Canada?
The fees that Licensed Insolvency Trustees charge for consumer insolvency matters are regulated by the federal government. This helps protect consumers from unexpected or excessive costs.
In a consumer proposal, the trustee’s fees are included in the payments you make through the proposal. You do not pay a separate trustee fee on top of the agreed proposal payments.
In a bankruptcy, costs are also regulated and will be explained before you decide whether to proceed. David Sklar & Associates offers consultations at no charge, so you can learn about your options before making a decision.
Licensed Insolvency Trustees in Ontario
David Sklar & Associates helps individuals and families across Ontario understand their debt relief options. Whether you are dealing with credit card debt, payday loans, CRA debt, collection calls, or wage garnishment, our team can review your situation and explain whether a consumer proposal, bankruptcy, or another option may be appropriate.
We work with clients in Toronto, the GTA, and communities across Ontario. Our approach is confidential, practical, and focused on helping people understand their choices without judgment.
The Bottom Line on Licensed Insolvency Trustees in Canada
A Licensed Insolvency Trustee is a federally regulated professional who can help you understand serious debt problems and the legal options available in Canada. If you are considering a consumer proposal, exploring bankruptcy, or simply unsure what to do next, an LIT is the right professional to consult.
If you are feeling overwhelmed by debt, book a consultation with David Sklar & Associates today. Our team of Licensed Insolvency Trustees helps Ontario residents understand their options and take the next step toward financial stability.
FAQs About Licensed Insolvency Trustees
What does a Licensed Insolvency Trustee do?
A Licensed Insolvency Trustee assesses your financial situation and explains available debt relief options. LITs are the only professionals authorized to file consumer proposals and bankruptcies in Canada. David Sklar & Associates helps Ontario residents find the right path forward based on their circumstances.
Do I have to go bankrupt if I see a Licensed Insolvency Trustee?
No. An LIT will review all of your options, which may include budgeting changes, debt consolidation, credit counselling, a consumer proposal, or bankruptcy. Bankruptcy is only one possible option and is not always the recommendation.
How much does a Licensed Insolvency Trustee cost?
Trustee fees for consumer proposals and bankruptcies are regulated by the federal government. David Sklar & Associates offers consultations at no charge. In a consumer proposal, the trustee’s fees are included in your monthly proposal payment and are not charged separately on top of that amount.
What is the difference between an LIT and a credit counsellor?
A credit counsellor can help with budgeting and may arrange a debt management plan. Only a Licensed Insolvency Trustee can file a consumer proposal or bankruptcy and provide legal protection from creditors under the Bankruptcy and Insolvency Act.
Can a Licensed Insolvency Trustee stop collection calls?
Yes, if you file a consumer proposal or bankruptcy through an LIT, a legal stay of proceedings takes effect. This stops most unsecured creditors from contacting you, suing you, or garnishing your wages.
Is a Licensed Insolvency Trustee the same as a bankruptcy trustee?
The term bankruptcy trustee was commonly used in the past. Licensed Insolvency Trustee is the current professional title in Canada. LITs administer both bankruptcies and consumer proposals.
Can a Licensed Insolvency Trustee reduce my debt?
An LIT can help you file a consumer proposal, which may allow you to repay only a portion of your unsecured debt if your creditors accept the proposal. The amount offered depends on your income, assets, debts, and what creditors would likely receive in bankruptcy.
Can a Licensed Insolvency Trustee help with CRA debt?
Yes. CRA debt can often be included in a consumer proposal or bankruptcy. Your trustee will review your tax debt, other creditors, income, and assets to explain what options may be available.
Is a Licensed Insolvency Trustee better than debt consolidation?
It depends on your situation. Debt consolidation may work if you qualify for an affordable loan and can repay the full balance. A consumer proposal may be more appropriate if you cannot keep up with payments or need legal protection from creditors.
Will speaking with a Licensed Insolvency Trustee affect my credit?
No. A consultation itself does not affect your credit. Your credit is affected only if you choose to file a formal insolvency proceeding, such as a consumer proposal or bankruptcy.
Source Notes for Trustee Review
These sources were used to support the technical sections of the draft. They are included for review only and should be checked by the LIT team before publication.
- Office of the Superintendent of Bankruptcy, What is a Licensed Insolvency Trustee?: https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/you-owe-money/what-licensed-insolvency-trustee Supports the definition of an LIT as a federally regulated professional who helps people make informed choices about debt problems.
- Office of the Superintendent of Bankruptcy, Find a Licensed Insolvency Trustee: https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en Supports wording that the OSB licenses persons to administer bankruptcies and proposals.
- Office of the Superintendent of Bankruptcy, Consumer proposals: https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/you-owe-money/you-owe-money-consumer-proposals Supports wording that a consumer proposal is formal, legally binding, administered by an LIT, and cannot exceed five years.
- Bankruptcy and Insolvency Act, section 66.11: https://laws-lois.justice.gc.ca/eng/acts/b-3/section-66.11.html Supports the consumer debtor definition and the $250,000 limit, excluding debts secured by a principal residence.
- Financial Consumer Agency of Canada, Consumer Alert on debt help and credit repair: https://www.canada.ca/en/financial-consumer-agency/services/debt/debt-help/alert-debt-credit-repair.html Supports the caution around companies that advertise debt help or credit repair services.
- Financial Consumer Agency of Canada, Getting help from a credit counsellor: https://www.canada.ca/en/financial-consumer-agency/services/debt/debt-help.html Supports the distinction between credit counselling and working with an LIT for proposals and bankruptcies.
- Office of the Superintendent of Bankruptcy, Code of Ethics: https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/licensed-insolvency-trustees/code-ethics Supports the discussion of trustee professional standards, conflicts of interest, advertising, and regulatory obligations.
- Office of the Superintendent of Bankruptcy, Consumed by debt: https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/consumed-debt-information-consumers-insolvency-process Supports the note that fees vary by case and are regulated by the federal government.
