When you begin looking for help with debt, you will encounter different types of advisors. Some focus on credit counselling, others on debt consolidation, and some on settlement strategies. Others are lawyers. Some are unlicensed and unregulated debt advisors. Each operates within a different framework, agenda and bring different skills to bear.
A licensed insolvency trustee operates within a federally regulated system. Their role is not to promote a specific product or financial service. It is to administer formal insolvency processes (but only if necessary) and provide guidance within that structure. Including informing you about services they do not offer, where and how to access those services and when you may best need legal advice.
The licensed insolvency trustee (“LIT”) used to be called a Bankruptcy Trustee, but that name was officially changed by the Federal government in order to emphasise the breadth of services and responsibilities the LIT has.
This distinction is important because it shapes how advice is given and how solutions are implemented.
Working with a licensed insolvency trustee gives you access to options that are not available through other channels, along with guidance that is designed to be impartial.
What “impartial” means in practice
The term “impartial” is often used, but it is worth clarifying what it actually means in this context.
A trustee does not represent you in the same way a lawyer would, and they do not represent creditors in the way a collection agency would. Their role is to administer the process strictly in accordance with Canadian law.
This means that when they assess your situation, their focus is on identifying the appropriate solution based on your financial position. Even if it is a service they are not allowed to offer. The LIT will be able to refer you to a lawyer, accountant, mortgage broker or debt consolidation company, credit counselling etc. as makes sense for you. The LIT will discuss all potential options and elaborate as relevant based on your circumstances. If a consumer proposal is suitable, they will explain how it works. If bankruptcy in Canada is more appropriate, they will outline that option as well.
If neither a consumer proposal or a bankruptcy is necessary, they will tell you that and make practical suggestions as outlined above.
This approach is different from services that are built around a single solution.
Why trustees are the only professionals who can provide access to certain solutions.
In Canada, the most powerful, formal insolvency processes are governed by federal legislation. Only licensed insolvency trustees are authorized to administer consumer proposals and bankruptcies.
This is not a general designation. Trustees are highly regulated professionals who operate under a defined framework, with oversight to ensure consistency and fairness including strict professional ethical rules and duties.
This structure ensures that when you enter into a formal process with an LIT, it is handled strictly within the rules to protect your rights and those of the creditors.
There is no need for any intermediary before you access the LIT for a private and confidential initial consultation. In nearly all instances these initial consultations are provided free of charge and without obligation by you.
How trustees are compensated. Or what is this going to cost me?
Another area where there is often confusion is how licensed insolvency trustees are paid.
Unlike many professional services, trustees do not usually charge upfront consultation fees for confidentially reviewing your situation. The initial discussion is focused on understanding your financial position and explaining all of your options. You are the person who decides what steps to take
If you proceed with a consumer proposal or summary administration (which means that the property that would have to be surrendered is less than $15,000) bankruptcy, the trustee’s fees are governed by federal tariffs and are built into the structure of the process. You do not pay separate advisory fees outside of that structure. Said in layman’s terms: you only have to pay the amount settled with the creditors or the law requires is to be paid in the bankruptcy – no other fees to the LIT.
This creates a level of transparency in how costs are handled and ensures that the focus remains on the solution rather than on additional professional fee charges.
How this differs from debt advisor counselling and settlement services
Credit counselling organizations focus on budgeting and repayment plans. For all your debt. These can be effective in situations where debt is manageable and can be repaid over time. These organizations often portray themselves as not-for-profit but in fact are not charity. You have to pay them, or the creditors pay them (from the money the creditors collect through the credit counselling company). Some of these organizations are very transparent and do excellent work where the debt amount is small. It is important that you do research as to who you are working with. These organizations only make money of they get you into one of their plans – unlike LITs they are not obliged to explain all options (some do and some do not so please be aware). Not all debts can be covered by these organizations (for example, CRA tax debts are largely excluded).
Debt settlement services may attempt to negotiate reductions with creditors, but they do not operate within the same legal framework and do not have the authority to bind all creditors to an agreement. If one creditor refuses to settle, they can ruin destroy the arrangement you have made with all the other creditors. There is no stay of proceedings – creditors, until they agree in writing, can still sue you and garnishee wages for example.
The debt advisor industry is unregulated and while there are some very informed and professional operators you do not know what you are getting. Some debt advisors, through ignorance or outright unprofessional behaviour make your situation worse (literally turning a money problem into a criminal or other type of problem) and charge you up front fees for that. This is the “wild west” and in most cases not useful. You are better off speaking to the LIT for no fees and if the LIT detects a legal problem being recommended to a lawyer who specializes in this area.
A trustee operates within a formal system. When a consumer proposal is approved, it is legally binding on all included creditors – even those credito0rs who wanted to reject the offer. From the time the LIT files your consumer proposal until the offer is approved you have protection from your creditors. When bankruptcy is filed, legal protections take effect immediately.
What this means for you as you evaluate your options
If you are considering how to address your financial situation, the role of the trustee is to provide clarity based on facts and information.
This involves reviewing your income, expenses, assets, debts and circumstances. Then explaining how each available option would apply based on your situation. It also involves outlining the responsibilities associated with each option so that you understand the full picture and know what it will cost
The goal is not to move you toward a specific outcome. It is to ensure that you have the information needed to make a decision that aligns with your situation. The ultimate goal of the LIT is to get you to a position where you are debt free.
Why a trustee may recommend alternatives
It is important to note that not every financial situation requires a formal insolvency process.
If your debt can be managed through budgeting, refinancing, Orderly Repayment of Debt programs (only in some provinces) or other informal strategies, a trustee may recommend that approach instead.
This is part of what makes the guidance impartial. The focus is on the appropriate solution, not on applying a formal process where it is not needed.
When formal solutions become relevant
There are situations where informal strategies are not the effective solution. This may include cases where:
- Debt levels exceed what can be repaid within a reasonable timeframe
- Interest costs prevent meaningful progress
- Certain creditors will not cooperate
- Collection activity is ongoing
- Financial obligations are competing with essential expenses
In these situations, formal solutions such as consumer proposals or bankruptcy provide a structured path forward.
A trustee will explain how these options work and what they would look like in your specific case.
The benefit of a structured process
One of the key advantages of working with a trustee is the structure that the process provides.
Instead of managing multiple creditors, varying interest rates, and different payment schedules, you move into a single, defined process with clear terms, obligations and very importantly formal protection from your creditors under Federal law.
This structure reduces complexity and allows you to focus on moving forward rather than managing ongoing financial pressure. Simply because these are formal processes under Federal law does not mean they are confusing and complex or that you
A professional approach to financial challenges
Addressing financial difficulty requires a serious approach – to avoid serious consequences of bad advice making the situation worse. It involves getting the information needed from a licensed and regulated professional leading to understanding your situation clearly and applying the right tools to resolve the financial challenges.
A licensed insolvency trustee provides both the framework and the guidance to do this effectively.
They operate within a regulated system, offer impartial advice, and administer solutions that are designed to resolve debt in a structured way.
Speak with a trustee to understand your situation
If you are considering your options, the most effective next step is to have a conversation.
Baigel Corp works with individuals across Ontario and Alberta to provide confidential, no cost consultations. The purpose is to help you understand your financial position and the solutions that may be available to you.
If you would like to explore your options, speaking with a licensed insolvency trustee can provide the clarity you need to move forward.
*Baigel Corporation is a federally regulated Licensed Insolvency Trustee