You may be wondering what a licensed insolvency trustee (LIT) is and what they do. If you’re struggling with debt or money management in any way, you should contact a licensed insolvency trustee immediately as they are the only federally regulated debt advisors in Canada.
How Can a Licensed Insolvency Trustee Help You?
A licensed insolvency trustee, formerly known as a bankruptcy trustee, is a professional that helps individuals and corporations dealing with insolvency (the inability to repay debts). A trustee can do everything from providing practical financial advice and budgeting tips to guiding individuals through the steps of filing for a consumer proposal or a bankruptcy.
Trustees don’t just work with debtors — they work with creditors, too. Creditors are heavily involved in processes like consumer proposals, division one proposals and bankruptcies. Trustees notify creditors that their client intends to begin one of these debt relief strategies. From that point on, they act as intermediaries between creditors and debtors to make sure that they are abiding by the terms of the insolvency process. Trustees have a legal obligation to protect the rights of all parties involved. So, they work hard to keep everything above board and everyone in check.
Click the link to find out more information about licensed insolvency trustees and certified insolvency counsellors and what they do for their clients.
What Makes Them Different From Other Debt Solution Providers?
While there are lots of businesses that promise debt relief, licensed insolvency trustee firms are different. They are highly regulated to ensure that trustees are following the federal and provincial laws to the letter and that they are also working in the debtor’s best interests. That is why booking your first consultation at David Sklar & Associates is free — our priority is to learn about your financial situation and present the best solutions available to you, not to make a profit.
The truth is that people who are struggling with debt are vulnerable to unlicensed, unregulated debt solution companies that are focused on making a profit and not on the well-being of the individual. These companies offer solutions that are too good to be true and sometimes leave the debtor in a worse financial state than when they started with. It’s crucial that debtors can access solutions from professionals that are trustworthy, transparent and, most importantly, legitimate.
LITs are regulated by the Office of the Superintendent of Bankruptcy (OSB). The OSB is a branch of the federal government that oversees the application of the Bankruptcy and Insolvency Act (BIA), which sets and enforces standards for how insolvency estates should be handled. The OSB oversees LITs to guarantee that they are meeting the strict standards of practice and not violating the Code of Ethics for Trustees. If a client feels like their trustee has done something wrong, they are allowed to file a complaint directly to the OSB.
They are also licensed through the Office of the Superintendent of Bankruptcy. To acquire a license, they have to meet the following qualifications:
- Successfully complete the Chartered Insolvency and Restructuring Professional (CIRP) Qualification Program
- Successfully complete the CIRP National Insolvency Exam
- Successfully complete the Insolvency Counsellor’s Qualification Course
- Pass the Office of the Superintendent of Bankruptcy’s Oral Board of Examination
- Be solvent
- Be of good character
- Be of good reputation
What Do They Do?
Licensed insolvency trustees work with clients to help them find the right way to handle their debts. There is no single answer to achieving debt relief. Trustees determine their findings on a case by case basis. Some clients may only need credit counselling and strong budgeting changes to reach financial stability, while others will need more in-depth solutions like filing for a consumer proposal.
Here are the main services that our trustee firm offers:
- Credit counselling services
- Consumer proposals
- Division 1 proposals
- Personal bankruptcy
- Corporate bankruptcy
Read ahead to learn about these specific debt relief strategies.
Credit counselling sessions teach clients how to responsibly manage their money and repay their debts. The sessions are meant to give clients the tools to achieve financial stability on their own and then maintain it for the rest of their lives.
If you spend beyond your means, your trustee may recommend that you attend sessions about creating and maintaining a budget to improve your finances. One of the best reasons to start a budget is that it will help you keep track of your expenses so that you don’t spend more than you have. When you have the guidelines written out for you, it’ll be much harder to push your limits and rack up debt. Click here to see our printable budget form and get started on your personal monthly budget right away.
Or maybe you have problems with credit card debt and want to stop worrying about reaching your limit every time you put a new transaction on your card. You’re not alone. In late 2019, the credit bureau Equifax Canada reported that credit card utilization rates went up across the country and lead to higher delinquencies. To keep you from maxing out your card, your trustee might recommend that your counselling sessions focus on responsible credit use.
Here are some other financial topics that credit counselling sessions can focus on:
- Reaching financial goals
- Breaking bad financial habits
- Managing debt
- Establishing strong credit
- Savings funds
Credit counselling is also an essential step in completing consumer proposals, division one proposals and personal bankruptcies. These mandatory sessions encourage clients to manage their finances long after their official discharge, reducing their chances of declaring insolvency again.
A consumer proposal is a legally binding agreement made between a debtor and their creditors, effectively lowering their debt total and eliminating interest. Once you file a consumer proposal, you will repay a portion of your debts to creditors over a pre-agreed schedule (a maximum of five years). When you’re done with your repayment plan, the original debt to your creditors is considered “paid in full.”
A consumer proposal is an alternative to filing for personal bankruptcy. One of the reasons why it’s considered an easier choice is that the debtor’s assets (vehicles, luxury goods, investments, etc.) are completely untouched during the process. Another benefit is that your repayment total doesn’t change once the agreement is in effect. An increased income does not mean that you have to increase your repayment amount.
If you’re having trouble managing your debt and you don’t think you can repay your creditors, you may be eligible for a consumer proposal. To qualify, you will need to owe less than $250,000 (excluding the mortgage on your primary residence) and be unable to repay your unsecured debts in a reasonable time or in a reasonable manner.
According to an IPSOS poll, the average Canadian owes $8,539.50 in consumer debt — this doesn’t include debt from mortgages. So, if you’re anywhere close to the average, you will easily qualify for this insolvency solution.
It’s important to know that you can only file for this type of debt relief strategy with the help of a licensed insolvency trustee. This is also true for division one proposals, personal bankruptcies and corporate bankruptcies. In Ontario, trustees are the only experts with the authority to do this.
Division 1 Proposal
A Division 1 Proposal is similar to a consumer proposal. It’s a legally binding agreement made between a debtor and their creditors. One of the main differences between a consumer proposal and a division one proposal is that it’s designed for individuals who owe more than $250,000 (excluding the mortgage on their primary residence). It’s also the only proposal option available for insolvent businesses.
A division one proposal is also exhaustive and thorough, especially when it’s for a struggling business. The process may involve extensive audits, tax liability assessments, employee retention assessments and more to gain approval from creditors and the Court.
Personal bankruptcy is a last resort solution for individuals that can’t repay their debts. A trustee will approach you with other strategies before suggesting that you turn to bankruptcy.
By filing, you are officially declaring to the Courts and your creditors that you are insolvent and that you do not have the equity to cover all of your debts. During a bankruptcy, a trustee settles your assets (although there are plenty of asset exemptions in Ontario) and distributes the funds among your various creditors. You will also manage bankruptcy duties, like making repayments to creditors and attending creditor meetings before receiving a discharge. Click here to learn more about filing for bankruptcy in Ontario as an individual and what a licensed insolvency will do for you during the process.
While personal bankruptcy is designed for individuals, corporate bankruptcy is designed for businesses that can longer afford to pay their debts. Here is a list of some of the major retail companies facing bankruptcy this year.
A trustee will often encourage them to file for a division one proposal before declaring bankruptcy. If they are rejected from a division one proposal or fail to complete the steps properly, then they are automatically put into bankruptcy.
What Other Things Do Licensed Insolvency Trustees Do?
- File documentation required by the Office of the Superintendent of Bankruptcy (OSB)
- Attend meetings called by creditors, the OSB and the Court
- Oversee the votes from creditors on consumer/division 1 proposals
- Arrange for mediation services for any debtors that need them during the insolvency process
- Offer money management and debt reduction advice. You can access this practical information on our official website, blog and social media pages.
Licensed Insolvency Trustees Are More Important Than Ever
The rates of insolvencies across the country have been rapidly growing. In 2019, the Office of the Superintendent of Bankruptcy found that Canada’s rate of personal insolvencies was the highest its been in a decade. And the province that has contributed the most to this increase? Ontario. According to data from the OSB in January 2020, Ontario has the fastest rise for insolvency filings than any other province or territory. The rate increased by 15.3% in a single year.
And those statistics were uncovered before the pandemic reached Canada. Months later, COVID-19 shook the country’s economy, impacting the financial stability of millions. Financial experts at the Bank of Canada and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) predict that there will be a spike in insolvencies once COVID-19 financial aid programs close for good.
Financial aid programs like the Canada Emergency Response Benefit (CERB) are still in effect. Recently, the CERB program was extended to handle the continuing repercussions of the pandemic, pushing the limit of 16 weeks of financial support to 24 weeks. That’s only another two months. To learn more about managing funds from the CERB program, you should read our blog posts “Financial Stress in the Midst of the COVID-19 Crisis,” “Everything You Need to Know about Financial Help during COVID-19,” and “The Drawback of the Government’s COVID-19 Financial Help.”
Unfortunately, there’s no way to know what the economy will be like in the upcoming months. The rates of COVID-19 infections appear to be going down, but there is still fear that a second COVID-19 wave will shut down re-openings and send cities back into lockdown. Only time will tell.
If you are having trouble with your personal finances at this time, you should contact a licensed insolvency trustee right away. A simple consultation can guide you in the right direction.
David Sklar & Associates:
Residents of the Greater Toronto Area have had their lives turned upside-down by the pandemic of COVID-19. Here at David Sklar & Associates, we understand that many residents have been thrown into financial instability because of this health crisis and are concerned about what to do next. If you need financial help, we are still here for you. We offer over-the-phone consultations and electronic document signing so that you can access our services from the safety of your home. We want to encourage our clients to prioritize their health as best as they can during these uncertain times.
A licensed insolvency trustee is an expert that can help you deal with your personal finances, no matter how serious your situation may seem. They offer guidance and comprehensive counselling sessions. They offer debt relief solutions. And most importantly, they give you an opportunity to take control of your finances and find a fresh start.