Role of a Licensed Insolvency Trustee in Canada

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Selecting a debt advisor is a crucial step in your overall debt recovery. Licensed Insolvency Trustees (LIT) are Canada’s only federally regulated debt advisors. The Licensed Insolvency Trustees outline your options and advise you on how to get out of debt and obtain your life back. If you are planning to file a consumer proposal or a bankruptcy, LITs are the team that can administer them officially. Let us now find out more about LIT and its role in your debt-recovering life.

What is a Licensed Insolvency Trustee (LIT)?

Licensed Insolvency Trustees operate with the Government of Canada, representing the Office of the Superintendent of Bankruptcy Canada. Only Licensed Insolvency Trustees can assist you with consumer proposals or bankruptcy in Canada. As such, they work neither for the debtor nor the creditor but instead are obligated to respect each party and offer the best solution. An individual must undergo training and pass a written and oral examination to become a LIT. Also, he should encounter an investigation by the Canadian police. On average, fewer than 50% of individuals only pass the written examination on the first try, even with special training. Furthermore, the trustees must pass a three-year bankruptcy law course and continue their ongoing education as they work as Licensed Insolvency Trustees.

For whom do the Licensed Insolvency Trustees work?

The LITs are not government employees, and they work impartially for both the creditors and debtors. They work for themselves or via a firm of trustees. They have the freedom to work in their specialized areas of finance, as many LITs are categorized as Certified Public Accountants. Others are licensed credit counsellors who help people through their debt processes and credit counselling sessions. Even though the primary goal of a LIT is to decrease the debt of individuals, they are ethically and legally mandated to perform a service that is most appropriate to creditors and debtors alike.

Who pays for the Licensed Insolvency Trustee?

The Insolvency Trustees are paid by the creditors involved in the consumer proposal and the bankruptcy. Though the trustees are not paid directly by the debtor, they are paid out of the proceedings of the bankruptcy claim. Another method to pay LIT is through the assets sold from the bankruptcy. All funds to be allocated to the creditors are collected by the trustee and kept in the account. There is a government-established formula for controlling funds at the end of a bankruptcy, which takes almost nine months to be discharged. The government fees are paid initially, followed by the trustee, and then divided between payments to the owed creditors.

Is it possible to hire a LIT directly?

When you need a trustee to walk you through consumer proposals or bankruptcy, you do not hire them directly but not by a referral. Instead, you have to schedule a meeting with the chosen LIT. You do not have to pay a LIT when you meet them, as most reputable trustees in Canada offer a free and confidential consultation. Sometimes, you do not meet with the trustee at the beginning of the process. Often, a counsellor or a sales individual meets you at the trustee’s office to collect all the required information for the paperwork. A trustee meets you before completing a bankruptcy or a consumer proposal.

Who should be trusted with debt relief options?

Numerous debt relief options are available to the people, but you must go through a Licensed Insolvency Trustee if you seek either a consumer proposal or bankruptcy. Unlicensed individuals charge fees to offer debt reduction services that are not even legally binding. You should be well aware that a reputable, licensed trustee does not charge you any money to meet with them.

What are the Bankruptcy services offered by LIT?

Once you and your trustee decide to move forward with your bankruptcy in Canada, the trustee has specific responsibilities after signing the documents. Here are they:-

  • The LIT will email the respective bankruptcy documents to each of your creditors within five working days of signing the papers. At this juncture, if a creditor contacts you, you can direct them to your trustee;
  • Your trustee will then require your monthly income and expenses after supplying you with the forms necessary to move the bankruptcy claim further.
  • You will meet the trustee at his office within two months of filing for bankruptcy for a financial counselling session. A second counselling appointment is after seventh-months. It is compulsory to attend these sessions, as, without them, you cannot be released from your bankruptcy;
  • After the second counselling session, your LIT will report how you conducted yourself during the bankruptcy. If you have performed each of the requested duties responsibly, your bankruptcy will be discharged at the end of nine months.
  • Lastly, your trustee will send you a Certificate of Discharge. At this point, you and your trustee likely have no more responsibilities until your bankruptcy is withdrawn from your credit report.

What are the Consumer Proposal services offered by LIT?

Alike bankruptcy, once you and your trustee decide to move forward with your consumer proposal in Canada, the trustee has specific responsibilities after signing documents. Here are they: –

  • First, you have to give a complete list of what you own and what you owe. Using those details, the trustee will put a proposal based on your ability to pay.
  • Once the required documents of the proposal are filed, the trustee will then submit the proposal to your creditors. They have 45 days to accept or reject the proposal.
  • If creditors are not satisfied with the proposal terms, the trustee can put forward some amendments. But if the proposal is rejected, you will have to look at other options like bankruptcy.
  • If the creditors accept the proposal, you will be obliged to make periodic payments to the trustee, which will be transferred to the creditors. You will also have to attend two counselling sessions to get back on track with your financial life.
  • Further, you have to adhere to any other terms and conditions in the consumer proposal. Once these are met, you will be legally released from the proposal and will be able to rebuild your credit rating.

Need a Licensed Insolvency Trustee? Planning to file a bankruptcy or consumer proposal? Contact Dana MacRae, one of the reputed Licensed Insolvency Trustees, for a free and confidential consultation without wasting time. 

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