Licensed Insolvency Trustees
(Formerly called Bankruptcy Trustees, prior to April 2016)
What is a Licensed Insolvency Trustee & How Can they Help?
A Licensed Insolvency Trustee is a person licensed by the Superintendent of Bankruptcy to administer proposals and bankruptcies and manage assets held in trust. The trustee can give a debtor information and advice about both the proposal and bankruptcy processes and make sure that both the debtor’s rights and the creditor’s rights are respected.
By law you must work with a Licensed Insolvency Trustee when filing bankruptcy or a consumer proposal in Canada.
Trustees are also the most highly trained and educated Debt Experts in Canada. A significant number of Trustees in Canada have both an accounting designation and a university degree in addition to the Chartered Insolvency and Restructuring Professional Designation (CIRP). In addition, all trustees must complete and pass a rigorous three-year education program on bankruptcy and insolvency practice and law and may also be investigated by the RCMP before being granted a trustee license. Ongoing professional development is mandatory for all CIRP’s.
In most cases, it will cost you less to use a Licensed Insolvency/Bankruptcy Trustee than other debt consultants since Trustees have their fees regulated by the government.
Your Trustee will explain your duties in detail, to ensure that you complete your bankruptcy as quickly as possible.
When dealing with a Trustee you are protected as follows:
- By the fact that the federal government regulates trustees;
- By the stringent code of ethics to which all trustees are subject;
- By the mechanism in place to mediate any dispute you may have.
What is Insolvency and How Does it Differ From Bankruptcy?
Insolvency is a state in which one is unable to fulfill their financial obligations or pay their debts. A person who is insolvent has a few options such as filing for bankruptcy, debt consolidation, or a consumer proposal through which they can pay all or a portion of their debts.
Although insolvency and bankruptcy are commonly interchanged when referring to debt issues, the terms are altogether different in terms of their meaning. Insolvency refers to the financial condition – one in which a person experiences debt issues or when their debts are greater than their assets – due to which they may file for bankruptcy. In other words, bankruptcy is a solution to insolvency.
So it’s safe to say that bankruptcy is a legal procedure that subsequently follows insolvency if the person chooses to file for it.
Key Factors for Determining Insolvency
According to the Bankruptcy & Insolvency Act, insolvency is defined as the financial state in which a person is unable to meet their financial obligations or debts which amount to at least $1,000. When determining whether a person is insolvent, both cash flow and assets are considered. For instance, a person’s monthly cash flow may be lower than the amount owed but if they have assets that can be sold to fulfill their debt obligations, they are not considered insolvent.
Who or What is a Bankruptcy Trustee?
A commonly asked question is who or what is a bankruptcy trustee exactly. A bankruptcy trustee was the term previously reserved for what we now call a Licensed Insolvency Trustee. A Licensed Insolvency Trustee is one who reviews your debts and financial condition, including monthly cash flows and assets, to determine whether you are insolvent. As explained earlier, they will also recommend the right course of action and help you file for bankruptcy or a consumer proposal, depending on whichever option is better for your situation. However, a Licensed Insolvency Trustee will always let you decide which option is best for you.
What is Bankruptcy Filing?
Bankruptcy filing is a legal process which offers debt relief to debtors. The debtors have to surrender their non-exempt assets (ones which are applicable) to a Licensed Insolvency Trustee so they can be sold off to pay the amount that is owed. However, provincial and/or federal law exempts or protects many different types of assets and it is not uncommon for a debtor to file bankruptcy and retain all their assets. (Jarret – I wonder if you might want to put a link to the exemptions by province here).
People who are experiencing extremely challenging debt issues choose to file for bankruptcy to clear their debts so they can make a fresh financial start. However, it would be worthwhile to note that not all debts can be discharged when you file for bankruptcy, as there are some exceptions. These could include fines and penalties imposed by the Court, certain student loans, child support, etc.
Moreover, bankruptcy filing involves several steps, some of which include the filing of paperwork, sale of assets, attendance at credit counseling sessions, meetings with creditors, and many more. A Licensed Insolvency Trustee can help debtors every step of the way, as discussed in the next section.
What does a Licensed Insolvency/Bankruptcy Trustee Do for Me?
In a bankruptcy process the two main jobs of a Trustee are:
- To sell debtor’s assets, if that is something that is required in that particular case. For example, if the debtor owns a house with no mortgage, the Trustee, depending on the value and the province where the property is located, may be required to sell the house, and use the money to repay creditors (the people the debtor owes money to).
- To take whatever money they recover, and distribute it to the creditors at the end of the bankruptcy.
Bankruptcy is an extremely complex process and it is easy to get confused. A Licensed Insolvency/Bankruptcy Trustee helps through the process and makes sure it is done as quickly and efficiently as possible.
A person has to use a Trustee if he or she goes bankrupt. However, Trustees are not just for filing bankruptcy. They are also professional debt experts can:
- provide financial and debt counselling
- help you make a proposal to your creditors to avoid bankruptcy
- make arrangements with your creditors on your behalf
- negotiate settlement agreements
If a Trustee feels you need the protection of independent legal advice, the Trustee will refer you to an insolvency lawyer. In some cases the Trustee will even be able to advise you of a solution that will cost you nothing and have you avoid bankruptcy.
What Should I Do Now?
It’s a Trustee’s job to point you in the right direction and help you determine which option is best for you and your family.
If you are struggling with debt, or have collection agencies calling you, or are worried about wage garnishments, we advise you to contact a Licensed Insolvency Trustee for a free, confidential consultation to learn your options. There is no risk, no charge, no obligation, and it can usually be completed in 30 minutes or less.
We have Licensed Insolvency/Bankruptcy trustees ranging from British Columbia to Alberta, Ontario and more. They are some of the most experienced trustees who have helped individuals with financial difficulties address their debt issues head-on.
It’s important to receive the most up-to-date advice based on your unique situation so you can make the right decision. Our trustees are licensed by the Office of the Superintendent of Bankruptcy Canada and are committed to helping you resolve your debt issues so you can lead a stress free life. Get your questions answered today!
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