Many Canadians first hear the term “Licensed Insolvency Trustee” (“LIT”) when they or their business are experiencing financial difficulty. For individuals, that may mean collection calls, credit card balances that are becoming difficult to manage, lawsuits, wage garnishments, bank actions or Canada Revenue Agency enforcement actions. For businesses, it may involve cash-flow problems, creditor pressure, tax arrears or difficulty meeting financial obligations as they become due.
Licensed Insolvency Trustees are federally licensed professionals who work with both individuals and businesses experiencing financial difficulty and are authorized to administer formal insolvency proceedings under the Bankruptcy and Insolvency Act.
Searching online for solutions can make the situation more confusing because it is not always clear who is properly qualified to provide advice or administer formal insolvency options.
A Licensed Insolvency Trustee, often referred to as an LIT, is a federally licensed and regulated insolvency professional in Canada. An LIT is the only professional in Canada who is legally authorized to administer formal insolvency proceedings, including consumer proposals, bankruptcies, corporate proposals, and other formal restructuring or insolvency processes. LITs help individuals and families, and they also work with companies in financial trouble. Whether a person or a company, similar difficulties face you, including cash-flow pressure, creditor demands from banks and credit card companies or tax arrears to the CRA. Just as importantly, an LIT is required to explain the relevant options based on your circumstances rather than simply recommend one particular solution. The LIT considers options like refinancing, orderly repayment of debt, credit and budget counselling, selling assets, consumer proposals, bankruptcies, corporate proposals, restructurings, and other practical solutions where appropriate. Which option to choose is always yours.
Going directly to a LIT can help you avoid unnecessary fees, misinformation (or worse), and delays in getting the help you need.
What exactly is a Licensed Insolvency Trustee?
A Licensed Insolvency Trustee is a federally licensed and regulated professional who has completed extensive education, practical training, examinations, and licensing requirements established by the Office of the Superintendent of Bankruptcy, which is part of the Government of Canada.
Licensed Insolvency Trustees are regulated under federal legislation and are held to strict professional and ethical standards, unlike many people working adjacently to the debt industry, LITs must act fairly, administer insolvency and restructuring proceedings according to the law, and provide advice that reflects the debtor’s circumstances.
Many people are surprised to learn that a Licensed Insolvency Trustee is the only professional who can legally administer a Canadian consumer proposal or Canadian bankruptcy. An LIT is also the only professional who can get your principal debt compromised with the CRA, i.e. pay less than you owe. While other businesses may advertise debt relief services, they cannot directly provide these formal legal solutions, and are unregulated and unqualified in the complex field of bankruptcy and insolvency law.
How is a Licensed Insolvency Trustee different from a debt advisor?
This is one of the most important questions people should ask before seeking help.
Over the past approximately 30 years, the debt advisory marketplace has grown significantly. You may have seen the advertisements online, on buses, on the radio, on the subway and even billboards. Debt advisors may call themselves many things such a not-for-profit debt or credit counsellors, but they remain the same animal with no qualifications and no regulations. You could set up business tomorrow yourself as a debt advisor, and no one could stop you. Some of the debt advisor companies charge substantial upfront fees before referring clients to a Licensed Insolvency Trustee to complete the actual work that protects a consumer.
Many consumers do not realize this is happening.
They assume that the debt advisor they are already dealing with is a professional who will ultimately resolve their debt, only to discover they have paid someone whose role in some instances is simply to pass the file along.
It is your choice where to seek information and guidance about debt. Unfortunately, because the debt advisory industry does not have any formal licensing, regulatory oversight, training requirements or professional standards, some people receive unrealistic promises, incomplete information, or advice that creates additional risk to make a challenging situation even worse. A direct consultation with an LIT helps ensure that you receive information from a regulated professional who is qualified to explain formal insolvency options and ethically bound to evaluate non-formal options.
For companies, an LIT’s role may include helping directors understand whether the business can be stabilized, whether a restructuring proposal is realistic, how creditor pressure should be managed, and what formal options may be available if the company cannot meet its obligations as they become due.
When you speak with a Licensed Insolvency Trustee, you are speaking directly with the only professional legally authorized to administer formal debt relief proceedings in Canada (if you need such a process). Initial consultations are provided at no charge. If, in your consultation it becomes apparent that you would benefit from legal advice, the LIT can recommend that you see a lawyer with experience in debt issues. The LIT will likely be able to provide a few names of trustworthy lawyers experienced in debt and insolvency matters who can assist you.
What happens during the first meeting with the LIT?
The following discussion focuses on what an individual can expect when meeting with an LIT about personal financial difficulties. An LIT also works with corporations and businesses experiencing financial difficulties, although those consultations involve different considerations and potential solutions.
It is a misconception that meeting with a Licensed Insolvency Trustee means you have already decided to file a consumer proposal or bankruptcy.
Nothing could be further from the truth, and an LIT is trained not to have any preconceptions about the range of available options.
The first meeting is an opportunity for the LIT to understand the facts of your situation (everyone’s case is unique), provide you with relevant information and review your options with you. For an individual, the Trustee will typically discuss income, household expenses, assets, debts and financial goals.
That conversation may include budgeting strategies, refinancing, debt consolidation, repayment options, a Canadian consumer proposal, Canadian bankruptcy or, in some cases, continuing with your current repayment plan if it remains realistic.
The objective is not to convince you to choose a particular solution. The objective is to ensure you understand the options available so that you can make an informed decision.
When should you speak with a Licensed Insolvency Trustee?
Many people wait much longer than they should because they believe their financial situation is not yet “bad enough” or they are embarrassed.
In reality, the earlier you seek advice, the more options you generally have.
If you are making only minimum payments, relying on credit cards to pay household expenses, receiving collection calls, worrying about lawsuits, struggling with CRA tax debt, never have money in your bank account or finding that the amount you owe never seem to decrease despite regular payments, it is worth having a conversation with a LIT. The same is true for business owners facing persistent cash-flow shortages, supplier pressure, tax arrears, payroll concerns, or creditor demands.
Seeking advice does not mean you have failed. Seeking advice does not mean you are committed to any action.
It means you are investing the time to properly understand your options from a licensed professional before financial pressure becomes a financial crisis.
How can a Licensed Insolvency Trustee help?
Every financial situation is different, which is why it takes a professional to help you analyze the facts and inform you about your options – how each option works and compare to other potential solutions (pros and cons).
For some people, improving cash flow and following a realistic budget may be enough to regain control. Others may benefit from refinancing .
Where debt has become too large to realistically repay without relief, a Licensed Insolvency Trustee will explain how a consumer proposal, or a bankruptcy, works and whether it is appropriate. For instance, a proposal allows eligible individuals to settle unsecured debts based on what they can reasonably afford while stopping interest on included debts and preventing most collection activity from continuing. Usually, the consumer proposal pays less than the total debt in a single, agreed monthly payment (through the LIT’s trust account) over a period of up to 5 years (without interest or separate fees). In short, a debtor can end up paying less than the total that they owe over a long period of time.
In situations where a consumer proposal is not realistic, bankruptcy may provide the legal fresh start that allows someone to rebuild their financial future.
The important point is that recommendations are based on your circumstances, not on a one-size-fits-all approach. Creditors often prefer a consumer proposal because it offers more to them than they would receive in a bankruptcy, even if payment is made over a long time. People in debt often prefer to pay a bit more through the consumer proposal because they wish to avoid bankruptcy and some of the implications associated with bankruptcy. Also, many people in debt prefer making a meaningful payment to creditors based on what is affordable because they are honest folk who want to do the best they can in their circumstances (most would pay in full if their situation allowed for it).
Why people wait too long
Financial stress affects more than just bank accounts.
People often delay asking for help because they feel embarrassed, worried about what others might think (especially family or the business industry you are in), or are convinced they should be able to solve the problem themselves. Many continue making minimum payments for years while interest charges consume most of what they pay each month.
Others refinance their homes, borrow from family members, or take on additional loans hoping things will improve.
Sometimes those decisions work.
Often, those approaches simply postpone the problem while the debt continues growing (and the stress continues).
By the time collection calls become lawsuits or CRA begins freezing bank accounts or garnishing wages, relationships and health breakdown, people frequently wish they had sought professional advice much earlier.
Taking the first step
One of the greatest benefits of speaking with a Licensed Insolvency Trustee is that you gain clarity.
Instead of wondering how your debt can be managed, whether your home or livelihood is at risk, whether creditors can take legal action against you or who will find out about your debt (we have all heard of sneaky collection agencies calling the workplace and neighbours!), you receive answers based on Canadian law and your specific circumstances.
The knowledge you will gain from the LIT, allows you to make informed decisions with confidence rather than reacting to whatever the next collection letter or creditor phone call happens to be.
For many people, simply understanding their options provides immediate peace of mind.
Speak with Baigel Corp.
If you have been asking yourself whether a Licensed Insolvency Trustee can help, the best way to find out is to have a conversation.
Baigel Corp. is a Canadian firm of federally licensed and regulated Licensed Insolvency Trustees providing confidential, no-charge consultations. We explain all relevant options available based on your financial circumstances. Whether the right solution involves a Canadian consumer proposal, Canadian bankruptcy, corporate proposal, restructuring, or another approach entirely, our goal is to help you understand your options and move forward with confidence.
You do not need to wait until debt becomes overwhelming. The sooner you seek advice, the more opportunities you are likely to have to resolve the situation before it becomes significantly more difficult.
*Baigel Corporation is a federally regulated Licensed Insolvency Trustee