Debt Relief Experts
The market is currently flooded with debt advice businesses offering to help consumers with excessive debt. The vast majority are unlicensed and unregulated ‘debt consultants‘ not licensed insolvency trustees. Many simply charge a substantial fee and then simply refer debtors to a licensed insolvency trustee to deal with their debts.
A bankruptcy trustee is now called a licensed insolvency trustee in Canada. The Office of the Superintendent of Bankruptcy of Canada recently changed the trustee designation from bankruptcy trustee to licensed insolvency trustee to help consumers better identify persons licensed to perform insolvency procedures under the Bankruptcy and Insolvency Act of Canada (BIA) including both personal bankruptcy and consumer proposals. We used to be called bankruptcy trustees or trustees in bankruptcy, but with the increased popularity of consumer proposals in Canada a trustee’s work is now much more than administering personal bankruptcy and so bankruptcy trustees are now called Licensed Insolvency Trustees or LIT.
Only persons and bankruptcy companies licensed by the government are legally allowed to use the term licensed insolvency trustee. Hoyes, Michalos & Associates Inc. are licensed insolvency trustees.
We know that people are often afraid to talk to a licensed insolvency trustee (or bankruptcy trustee if you still prefer). We also know that non-trustees take advantage of, and even promote, this fear through confusion and misinformation. So to clarify, I’m going to answer a few common questions about licensed insolvency trustees, the services we provide, who licensed insolvency trustees work for, and what work we do.
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Who regulates licensed insolvency trustees?
The Office of the Superintendent of Bankruptcy (OSB) is the federal agency responsible for licensing, monitoring, and regulating licensed insolvency trustees. The authority to do so is set out in the BIA, which is reviewed and updated by Parliament on a regular basis.
The OSB sets policy and procedures for the industry, like rules around surplus income limits, court proceedings, even a code of ethics for trustees. It is the licensed insolvency trustee’s job to administer bankruptcy and consumer proposals in accordance with these policies and procedures.
It is important to realize that an LIT is not a government employee. Many are accountants by trade that have specialized in dealing with debt and have completed an extensive program of training and examination to become licensed insolvency trustees.
Many are also licensed credit counsellors and become Chartered Insolvency and Restructuring Professionals (CIRP), passing and maintaining these designations through the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).
What bankruptcy services do they provide?
Licensed insolvency trustees are the only persons permitted to administer bankruptcy and insolvency procedures in Canada.
Services include assignments in bankruptcy and consumer proposals. In fact, proposals to creditors now account for a significant portion of most licensed insolvency trustees work (that’s one of the reasons they changed the name from bankruptcy trustees).
While there are a vast array of non-trustees advertising consumer proposals (sometimes disguised as government debt relief programs) only a licensed insolvency trustee can file either of these proceedings.
Who does a trustee work for?
While most licensed insolvency trustee work with a bankruptcy firm or company, every consumer proposal or bankruptcy filing in Canada is assigned to a specific individual trustee. At the end of the day, if a trustee makes an error, it is their personal license that is at stake – that’s why the training, educational, and practical experience requirements to become a licensed insolvency trustee are so high.
An LIT is an officer of the court
Having said that, an LIT has a duty of care to all of the stakeholders involved in the insolvency process. This includes the debtor who has filed a bankruptcy or a consumer proposal, their creditors, as well as the community at large and the “insolvency system”. Licensed insolvency trustees are officers of the Court and as such are held to a higher standard of responsibility than the average debt adviser.
Do you hire a licensed insolvency trustee?
No. You don’t hire a licensed insolvency trustee but you do choose the trustee you want to work with. You attend at a licensed insolvency trustee’s office and they assist you with the process of filing either bankruptcy or a consumer proposal and file the documents with the government.
You should never have to pay to see a licensed insolvency trustee. All reputable licensed insolvency trustees in Canada offer a free initial consultation. A referral is not necessary so if someone asks you to pay them to refer you to a trustee (or an officer of the court) know that this is not necessary. Pick up the phone and contact a licensed insolvency trustee directly.
What does a licensed insolvency trustee do?
Licensed insolvency trustees are required by law to meet with individuals before they may file an assignment in bankruptcy or a proposal to creditors. The purpose of the meeting is to perform a debt assessment, to allow the trustee to review the debtor’s situation and all of the various options that may be available to resolve their problems.
A significant portion of the people that meet with a licensed insolvency trustee don’t actually need to file bankruptcy or a consumer proposal. They needed someone to help them understand their problem and provide guidance on how to resolve their debts. One of the greatest concerns about the non-licensed debt counselling businesses offering consumers debt relief is they often counsel people into the solution that generates additional, unnecessary fees, or one that may not succeed, as opposed to the best solution for the individual.
Who is not a licensed insolvency trustee?
Anyone can offer debt relief advice or services in Canada but not all are licensed by the federal government to act as a licensed insolvency trustee.
Licensed insolvency trustees are required by law to disclose their licensed status in all of their advertising. If you are speaking to someone that hasn’t told you they are a licensed insolvency trustee it is probably because they are not licensed. If their website does not specify that their firm or company are licensed insolvency trustees, then they are not, no matter that they have information about bankruptcy or consumer proposals on their website.
This is important because the most powerful debt relief tools available in Canada – an assignment in bankruptcy and a proposal to creditors – may only be administered by a licensed insolvency trustee. As I stated earlier, it is quite common for non-licensed debt counselling businesses to charge people a fee and then refer them to a licensed insolvency trustee for help. This begs the question, what services are they providing to debtors for the fees they charge? In my opinion, very little. Most licensed insolvency trustees do not charge people for their initial meeting. The session is designed to provide individuals with options and help them decide which solution makes the most sense for them.
What is the difference between trustees and other debt consultants?
Doug: A lot of people hear the ads on TV for people who can ‘settle your debts for 30 cents on the dollar, 20 cents on the dollar’ and they wonder is that what you guys do? Is that different? There are a number of different people out there who say that they can help you deal with your debts. You got credit counsellors, some of them who are not-for-profit agencies, they can do what’s called a debt management plan. Where they take your debts, and you pay them off in full over a period of up to 5 years. And most cases they can negotiate reduced or 0 interest. So, if you’re able to pay all your debts in full, but you just need a bit of a break, credit counselling through a not-for-profit credit counsellor is a good way to go. People who are advertising on TV are for-profit companies, and they are either debt consultants or people offering deb settlements. They’re not necessarily regulated by anyone in particular. They don’t necessarily have any particular educational background or qualification. What they’re going to do is attempt to negotiate something with your creditors. Whether they can do it or not, who knows. Problem is you’re going to end up paying them a bunch of fees before you really find out what’s going to happen.
Ted: Bankruptcy trustees are licensed by the federal government, we’re officers of the court, So, right from the get-go we’re different from just about any other professional you’re ever going to meet. Lawyers are officers of the court, but they can’t serve in this kind of capacity. The analogy I usually give people is think of a bankruptcy trustee as a referee. So, the bankruptcy laws set out a specific way that things are to be administered, the trustees are the ones that make sure everyone follows the rules.
Doug: That’s what makes us different, we’ve actually got legal authority to do this. We are using federal law to bring about the settlement. So, when a consumer proposal is filed, all unsecured creditors, people like credit cards, income tax, bank loans, payday loans, are all treated exactly the same.
Ted: Chartered accountants were originally the only ones that were trustees, and you had to train the next generation. So chartered accountants trained the next generation of chartered accountants. It’s only been in the last 10 years when non-accountants have become trustees. And in fact in our firm, 1/3 of our trustees are not accountants. And the reason we did that is it gives us a broader spectrum, a better appreciation of individuals backgrounds and their experiences. We’ve got someone who’s got a health background, someone with an insurance background, one that used to be a teacher. The idea being that we could better relate to people because we’ve got this breadth of experience, as oppose to all being boring accountants.
Doug: We’ve got the hammer. I don’t need to get every single person to agree, I just need the majority to agree because that’s how the federal law works. So, if you’re not licensed by the federal government under federal law, you can’t do that. And that is the ultimate difference between a Licensed Consumer Proposal Administrator, a Licensed Bankruptcy Trustee, and everyone else.
What is a bankruptcy lawyer or bankruptcy attorney?
While in the US a bankruptcy trustee is a bankruptcy lawyer or bankruptcy attorney, in Canada, licensed insolvency trustees cannot be practicing lawyers. A bankruptcy lawyer in Canada specializes in insolvency law and may act as an advocate for a client in court. The majority of cases involving a bankruptcy lawyer in Canada are business bankruptcies or business insolvencies. In those situations a lawyer may represent the company or a creditor. However in personal insolvency, this adversarial role does not take place. Instead it is the licensed insolvency trustee who interprets the bankruptcy legislation, and if needed, can apply to the court for further direction. It is very rare than bankruptcy lawyers or attorneys become involved in the personal bankruptcy or consumer proposal process.
How does a licensed insolvency trustee get paid?
Technically, licensed insolvency trustees are paid by the creditors involved with the bankruptcy or consumer proposal. They are paid out of the proceeds of payments submitted by the debtor into their bankruptcy for the benefit of their creditors. For example, in a bankruptcy, an individual may be required to make monthly payments into their bankruptcy based on their income. The money is collected by the trustee and kept on account for the bankruptcy. At the end of the bankruptcy, there is an established formula for how any funds held on account are handled – government fees are paid first, then trustee fees, and then payments to the creditors of whatever moneys are left in the account.
Recall what I said earlier – licensed insolvency trustees are not government employees. They work for themselves or for a firm of trustees. This was done to keep the trustees independent from the government and the creditors. That independence is critical to keeping the insolvency process in Canada fair for all parties – the individuals in financial trouble, the creditors and the community.
If you are looking for debt relief, contact a Licensed Insolvency Trustee near you today for a free, no-obligation consultation. Our friendly, qualified, licensed debt professionals will help you build a plan to become debt free.
