How do you know if you have found a good bankruptcy trustee?

You are in financial trouble, so you decide to visit a bankruptcy trustee. How do you know you have found a good trustee? How do you know they are giving you good advice? Here are some tips:

First, do some research. Read our article on choosing a bankruptcy trustee, and our suggestions for questions to ask a bankruptcy trustee. Talk to your friends and family members; if they’ve used the services of a trustee, see who they recommend. Or, use our list of recommended Canadian bankruptcy trustees to find a trustee in your area.

Second, make a list of all of the questions you have about filing bankruptcy in Canada, and about alternatives to bankruptcy. If will be easier to remember your questions if you write them out in advance. Also, make a list of all of your debts, prepare a monthly budget, and make a list of what you own (cars, houses, and investments) so that you can give the trustee complete information to evaluate your situation.

When you arrive for your initial consultation, give the trustee a very brief, one minute overview of your situation, and show them the list of your assets, debts, and your monthly budget. Then let them ask you questions to fill in any missing information.

Now for the most important part of your initial consultation. You now ask the trustee the one question that will allow you to determine whether or not you have found a good trustee. The question you ask is:

What are my options?

Obviously that’s the question you want answered, but it’s also the best way to determine whether or not the trustee is there to provide a complete review of all of your options, or if they are simply there to “sell” you a bankruptcy. The trustee should tell you that you have the following options:

1. Do nothing. In some cases doing nothing is the correct option. If you have no assets, and if you are not working and have no wages that can be garnisheed, your best option may be to simply wait until you are working again.
2. Work it out on your own. You may be able to cut your expenses, or increase your income, or get help from your family to repay your debts on your own. If you own assets, you may be able to sell them and use the money to repay your debts.
3. Get a debt consolidation loan. If you still have good credit, a debt consolidation loan may allow you to combine all of your high interest debts, like credit cards, into one lower interest rate loan. With a lower interest rate more of your monthly payment goes towards repaying principal, so you can repay your debt faster.
4. Debt Settlement. If your debts are old, it may be possible to propose a debt settlement with the creditor. For example, if you owe $5,000 on a credit card and you haven’t made any payments on it for a year, the credit card company may be willing to accept a settlement of, say, $2,500 in a lump sum payment. Of course this option only works if you have the cash to propose in a settlement.
5. Debt Management Plan. A debt management plan is a service offered by not for profit credit counsellors. They will attempt to work out a plan where you repay your creditors in full, over a two to five year period, with a reduction or elimination of all future interest.
6. Consumer proposal. In a consumer proposal you offer to repay some, but not necessarily all, of your debts, over up to a five year period.
7. Bankruptcy. If none of the other options are possible, bankruptcy is the final option.

It’s possible that the trustee will not specifically mention each of these options when they meet with you. Some options may obviously not make sense given your situation. However, if the trustee only mentions one or two options, they have not explained your options to you in full, and therefore they are probably not a trustee that is fulfilling their responsibility to explain your options so that you can make an informed decision.

One of the advantages of researching your options before you meet with a trustee is that you will understand your alternatives. If you think one of these options may be applicable to you, ask the trustee to explain it to you, and ask them whether or not they think it would be a good option in your situation.

If you don’t get an understandable answer, or if the trustee seems unsure of the other options or refuses to discuss them with you, find another trustee.

If you are in financial trouble, you can decide which trustee to go to for advice, so if you are not comfortable with the advice you receive, keep looking.  You are making an important decision, so be informed, and be comfortable with your chosen trustee.