The only thing worse than being overwhelmed by debt is not knowing where to turn for help. A wide range of financial professionals offer solutions: accountants, Certified Financial Planners (CFP), money coaches, not-for-profit credit counsellors, etc. Choosing a specialist with the right skills, knowledge, and licensing can be challenging.
If your debt situation is dire, a Licensed Insolvency Trustee (LIT) might be the expert you need. LITs are the only debt advisors licensed in the country regulated by the federal government. They have the authority and training to administer every form of debt relief, including bankruptcies and consumer proposals.
Let’s dive into what an LIT is, what they do, and why they might be the right fit for you.
What is a Licensed Insolvency Trustee?
An LIT is a professional licensed by the federal government to advise individuals and businesses experiencing debt problems. They’re the only professionals in Canada legally allowed to administer bankruptcies and consumer proposals.
LITs (previously called bankruptcy trustees) specialize in all forms of debt relief. However, the ability to file bankruptcies and consumer proposals sets them apart from other debt management experts. A LIT will assess your financial situation and recommend the best path forward, whether a legal process like bankruptcy or another option like debt consolidation.
LITs are licensed and regulated by the Office of Superintendent of Bankruptcy (OSB), the federal agency that enforces the Bankruptcy and Insolvency Act (BIA) application.
What does a Licensed Insolvency Trustee do?
An LIT administers the insolvency process from beginning to end, be it a bankruptcy or consumer proposal.
They’ll start by reviewing your finances to see where you stand. Then, they’ll explain all your options and recommend the best solution for fixing your debt problems. The solution may or may not include insolvency through bankruptcy or consumer proposal.
If you decide to proceed with insolvency, your LIT will:
- Prepare and file the necessary documents with the OSB
- Notifying your creditors of your insolvency filing
- Verify your creditor’s claims to ensure they’re valid and accurate
- Manage the insolvency process to ensure you and your creditors honour the terms of the agreement
- Accept and distribute payments you make to creditors during the insolvency process
- Provide you with credit counselling sessions to help you acquire the skills and tools to manage your money better
- Where appropriate, apply for your discharge once you complete the insolvency process
The LIT’s duties vary slightly depending on whether you file for bankruptcy or a consumer proposal. For example, in a bankruptcy, they’ll work with you to sell your non-exempt assets and hold the proceeds in trust for distribution to your creditors.
Alternatively, in a consumer proposal, your creditors have 45 days to vote for or against your terms. Should they request a meeting of creditors, your LIT will arrange it and count the votes to determine if your proposal is accepted or rejected.
What are the advantages of working with a Licensed Insolvency Trustee?
Below are eight benefits of working with an LIT:
Advice and services from a qualified and federally regulated professional
Unlike ordinary debt consultants, LITs are regulated by the federal government and held to high professional standards. They must carry out their duties according to Canada’s insolvency laws and abide by the Code of Ethics for Trustees. LITs are also well-trained and educated to do their job. To obtain their license, they must complete an extensive three-year education program and adhere to ongoing professional development.
Access to a wide range of debt relief options
Not every debt problem needs to be resolved through bankruptcy or a consumer proposal. An LIT can help you navigate various other strategies for managing your debts. By law, they must explain all the options available and recommend the one most suitable for you. These may include applying for a debt consolidation loan or evaluating a debt settlement.
An opportunity to eliminate your debts for good – and at a lower cost
Working with an LIT can help you become debt-free without breaking the bank. Yes, there are other options for dealing with burdensome loans, such as debt settlement and debt management programs (DMPs). However, these strategies may fail to provide you with sufficient financial relief or can be expensive.
A personal bankruptcy or consumer proposal, which only a LIT can administer, may cost you much less than these and other options.
Similarly, you could possibly reduce your unsecured debts by up to 80% when filing a consumer proposal. You’ll have five years to pay off what’s left, and no interest or fees will accrue on your balance.
No need to deal with your creditors
Does the thought of negotiating (or even making contact) with your creditors make you tremble with anxiety? If so, you can rest easily, as your LIT will deal with them on your behalf throughout your insolvency.
Your first consultation is free
LITs offer free initial consultations where you can discuss your financial difficulties and explore solutions. You’re not obligated to act during this meeting, so you can freely discuss your challenges openly and honestly.
Federally regulated fees
When working with an LIT, you don’t need to worry about hidden or excessive fees. That’s because the federal government regulates the amount they can charge. An LIT’s fees are included in your bankruptcy or consumer proposal payments, so you’ll never be asked to pay anything extra.
Protection from creditors
When filing a consumer proposal or bankruptcy, a legal order called a stay of proceedings shields you from further collection actions by your creditors. Your creditors lose the right to contact you to demand payment. They also cannot continue or initiate wage garnishments, bank account freezes, and other legal tactics.
Expert guidance from start to finish
An LIT stays by your side while you work through your insolvency, helping you complete the process as quickly and efficiently as possible. They’ll answer all your questions, file every document, and handle all communications with creditors. You’ll have all the support and assistance you need to start a new life free from crippling debts.
Who does a Licensed Insolvency Trustee work for?
One of the biggest misconceptions surrounding LITs is that they represent only the interest of creditors. However, LITs are officers of the Court and, as such, are legally responsible for protecting the rights of all parties involved in the insolvency process. In other words, your LIT works for both you and your creditors. Their role is to create a balanced solution that results in a fair outcome for everyone.
How do Licensed Insolvency Trustees get paid?
The federal government regulates an LIT’s fees. Usually, their payment comes from the funds held in trust for your creditors, whether through a bankruptcy or consumer proposal. In other words, you don’t pay an LIT directly—they receive a portion of the money that would otherwise go to your creditors.
When should you ask a Licensed Insolvency Trustee for help?
Are you struggling to keep up with debt payments and have exhausted all your options? Maybe you’ve tried the debt snowball method, drastically cut expenses, or sought help from a credit counselling agency. Still, nothing that you’ve tried has improved your condition.
Does this scenario of constant disappointment describe you? If so, that’s one of the warning signs that you need to speak with an LIT. Others include chronic late payments, a reliance on high-interest loans, and harassing calls from creditors.
Everyone’s situation is unique. But if you’re drowning in debt and can’t find a way out, it might be time to reach out to an LIT. During your free consultation, you’ll have the opportunity to discuss your debt troubles and explore potential solutions. Even if you’re not sure that you’re ready for bankruptcy or a consumer proposal, a LIT can help you understand your options and figure out the best way forward.
How to choose the right Licensed Insolvency Trustee
Choosing the right LIT is crucial for a promising, debt-free future. Start by looking for someone with extensive experience, a good reputation, positive client reviews, and knowledge of insolvency laws in your region.
To simplify your search, check out the OSB website, which contains an LIT directory that allows you to search for a qualified LIT by location and name. You can also use the Government of Canada website, which lists LITs with an active practice. These tools can help you find a licensed professional in your area and verify their credentials.
It’s worth scheduling consultations with a few LITs to see who you feel most comfortable working with. A good LIT should take the time needed to thoroughly assess your financial situation. They should be able to communicate well and clearly explain the fees, processes, and pros and cons of each form of debt relief. They should also be patient, supportive, and compassionate.
At David Sklar & Associates, we have been helping people across Ontario resolve their debt problems since 1997. As LITs, we’re here to guide you down the best path to eliminate your debts and restart your financial future. If you live in Ontario and are experiencing debt problems, don’t hesitate to contact us for a free consultation to learn about your options.
