What Is a LIT? And What Do They Do?

What Is a LIT? And What Do They Do?

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 read ahead to find out their key purpose is and how they can help someone like you.

What Is a LIT?

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 giving a debtor practical financial advice to guiding them through the steps of 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?

While there are lots of businesses that promise debt relief to unlucky individuals for a profit, LIT 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 — the 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 insolvency and desperate to repay their debts are vulnerable to predatory companies. 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. 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 unlucky debtors to help them find the right way to handle their insolvency. 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

Credit Counselling

Credit counselling sessions teach debtors 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.

Consumer Proposal

A consumer proposal is a legally binding agreement made between a debtor and their creditors, effectively lowering their debt total and pausing penalties that make repayments difficult. With the proposal in effect, you can repay a portion of those debts to creditors over a pre-agreed schedule (a maximum of five years). When you’re done your repayment plan, the original debt to your creditors is considered “paid in full.”

A consumer proposal is usually presented as a useful 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

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.

What Is a LIT?

Corporate Bankruptcy

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 LITs 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.

LITs 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.

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We worked with Jackie. She is very professional and very caring. She is quick to respond and really cares about helping the people in front of her. I went with my uncle, who was scared of the whole process and mentally delayed. Jackie took her time with us and made him feel at ease. She carefully explained things multiple times and was very encouraging. She was a shining light in a difficult process.
stefania cicchino
13:54 27 Mar 21
Jackie is very professional, kind, supportive and super helpful. She was able to help me get back on track. Great service and I will definitely recommend them.
Christine Lowe
16:44 12 Mar 21
Jackie provided me excellent service, was very helpful, and she made feel very secured and she listened to all my concerns.i was speechless with excellent service.
Belen Trava
19:01 11 Mar 21
Had a great experience and successful result working with Carol at David Sklar & Associates! I was well informed and received great guidance after just the first conversation! She handled everything and helped me build a budget that is realistic and that i can really stick to! I highly recommend Carol and her team at David Sklar. Give them a call!
nicole lowartz
17:02 11 Mar 21
I've used these services twice and they have always been understanding, supportive and informative. They give you hope when you feel like there is none. I've referred multiple people to them and they've all had the same professional experiences. Jackie Stanley was amazing and got the job done. Thank you!
Kirah32
02:07 03 Mar 21
Dealing with any kind of debt can be stressful. Jackie is amazing! Professional, warm and extremely helpful to say the least! She made sure to answer all of our questions, address any concerns and made this whole process as smooth as possible.
Kristine San Gabriel
15:14 02 Mar 21
Working with David Sklar has been an easy and detailed process. I am especially thankful for the personal services provided by Jackie Stanley as she has been very informative and always ready to answer any questions or concerns in a timely manner. I highly suggest working with Jackie if the opportunity presents itself.
Clayton Surujbally
17:09 18 Feb 21
On February 2 l made the somber driveTo David Sklar and associates.I had known this location from having drovePast it many times over the years.I made a appointment using the phone numberOn their door in Pickering, OntLater that day l had a consultation withTrina Powell.Immediately upon meeting with her l wasBecomming more relaxed with the proceedings.Trina, was very down to earth, and very professional.We all have our calling, l can only gather sheHas found hers, and she is very good at herJob, and career.I met with her again two days later but on thisVisit l felt more relaxed, and self assured of myDecisions, having already met with Trina.Thank you! Hat's off to you.I also had a phone zoom call with MarkTo whom as well was very easy, and comfortableTo talk to,Thank you, Mark.The team at David Sklar and associatesShould take great pride, and comfort when theyHelp people, like me and probably so many others.Thank you.
Chris Thompson
17:11 07 Feb 21
I have dealt with this company before many years ago when I did my bankruptcy , and found to be very trustworthy, professional, and right at ease. No judgement, very understanding and very supportive. So of course would come to then again when this time did the debt consolidation. The staff is friendly and goes over all the details with you and answers all your questions so you know exactly what to expect and make an informative decisison. I aslo like how if I had any questions could leave a message or email the company and how promptly they answer me back. Thank you David Sklar & Associates for getting me back on the right track and living a life of debt free again. I have my freedom back thank you for all your help and support. Amen 🙏
Desiree Balkaran
17:09 07 Feb 21
I am so grateful to Rhoda Lewis for an amazing opportunity to start fresh, she is very knowledgeable, professional and very friendly. I felt so comfortable from the moment I walked into her office, I definitely would recommend Rhoda to anyone who is looking for help. I love and appreciate you very much for helping me. After all these years I still kept in touch with you via email just to say thank you. Thank you again so very much and continued blessings.
Elizabeth Thomas
09:18 04 Feb 21