When facing financial difficulties, it can be confusing to know where to turn for help. Should you consult with a bankruptcy lawyer or a Licensed Insolvency Trustee (LIT)? This guide aims to clarify the roles of these professionals and help you determine which one you might need.
Understanding the Role of a Bankruptcy Lawyer
A bankruptcy lawyer is a legal expert specializing in bankruptcy law. Their main role is to provide legal advice and represent their clients in court proceedings related to bankruptcy. However, it is important to note that a bankruptcy lawyer is not responsible for administering debt relief options like personal bankruptcy or consumer proposals.
When Should You Engage a Bankruptcy Lawyer?
There are specific instances in the bankruptcy process where a lawyer may be necessary. If a creditor opposes a bankrupt individual’s discharge, for instance, the debtor may need a lawyer to advocate on their behalf. Additionally, if a consumer proposal fails but the debtor wishes to revive it, a bankruptcy lawyer would be pivotal in obtaining court approval for that process.
Understanding the Role of a Licensed Insolvency Trustee
A Licensed Insolvency Trustee (LIT), on the other hand, is a federally regulated professional who provides advice and services to Canadians struggling with debt. They are licensed by the Office of the Superintendent of Bankruptcy (OSB), and their main role is to ensure that a bankruptcy or consumer proposal follows the processes outlined in the Bankruptcy and Insolvency Act.
When Should You Engage a Licensed Insolvency Trustee?
If you are dealing with consumer debt like credit cards, income tax debt, personal loans, and unsecured lines of credit, among others, you might need the services of an LIT. They start the process with a free consultation and debt assessment to discuss your financial situation and review all your debt relief options. They can also assist you in filing a consumer proposal or bankruptcy if necessary.
Bankruptcy Law in Canada
The Bankruptcy and Insolvency Act (BIA) is the main statute governing bankruptcy law in Canada. It is designed to provide relief to honest but unfortunate debtors and treat creditors equally and fairly. An LIT is required to have a thorough understanding of this law and pass several related exams to become licensed.
How are Licensed Insolvency Trustees Paid?
Consultations with an LIT are free, and there are no upfront fees when you engage their services. Their remuneration comes from the proceeds of payments you make during your bankruptcy or consumer proposal filing.
The Danger of Unlicensed Debt Consultants
While searching for professional help, you may come across unlicensed debt consultants purporting to offer debt relief services. Be wary of these individuals or companies. Only a Licensed Insolvency Trustee is legally allowed to administer a consumer proposal in Canada.
Conclusion
Whether you need a bankruptcy lawyer or a Licensed Insolvency Trustee depends on your specific circumstances. While a bankruptcy lawyer can provide legal advice and representation in court proceedings, an LIT can provide debt advice, administer debt relief options, and ensure the process complies with the Bankruptcy and Insolvency Act. If you are struggling with debts, it would be wise to consult with an LIT to discuss all your repayment options.
