How Do Insolvency Trustees Get Paid?

How Does My Insolvency Trustee Get Paid?

The intricacies of financial management often leave the layman perplexed. When faced with bankruptcy, this bewilderment only magnifies. An insolvency trustee comes into the picture as a beacon of hope. Thus, the question arises: How do Insolvency Trustees get paid? Let’s delve into this question and shed some light on the matter.

Who are Insolvency Trustees?

Insolvency trustees, also known as Licensed Insolvency Trustees (LIT), are financial experts who assist individuals or corporations in handling their debts and financial predicaments. In Canada, these professionals are licensed by the Federal Government. Prior to receiving this license, most trustees hold a professional accounting designation, such as Chartered Professional Accountant (CPA), and possess a university degree.

These professionals are not just confined to bankruptcy cases. They also handle financial restructurings and consolidations via Consumer Proposals or Division 1 Proposals. Their expertise lies in the administration of insolvencies, adhering to the provisions of the Bankruptcy and Insolvency Act set by the Government of Canada.

Accreditation Process

The journey to becoming an LIT is quite extensive, requiring a university degree and qualifying as a Chartered Professional Accountant before gaining approval from the Canadian Government to become a Licensed Insolvency Trustee. This process involves numerous examinations and gaining practical experience.

LITs have to maintain their professional development training annually and abide by a code of ethics. They are trusted with the task of managing money through trust accounts deposited at one of Canada’s banks and are accountable to the Office of the Superintendent of Bankruptcy (a Federal Government body) for the trust balances.

Tariff-Set Fees

In Canada, most insolvency filings are either summary administration personal Bankruptcy or a Consumer Proposal. The fees for the LITs in these cases are determined by a tariff set by the Government. This tariff-based fee calculation ensures transparency and uniformity across the country.

Pro tip: It is worth noting that some LIT offices might require a larger sum of money to initiate a file than others.

The Expense of Personal Bankruptcy

For a considerable period, the standard cost of a first-time summary administration personal Bankruptcy in Canada has been $1,800. This amount is usually paid over a nine-month period, with monthly payments ranging from $100 to $180 based on the recovery of other assets such as tax refunds or GST credits.

If a person’s average monthly income mandates them to pay “surplus”, as defined by the Bankruptcy and Insolvency Act, the personal Bankruptcy duration extends to 21 months, resulting in higher trust fund amounts and consequently, a higher fee for the LIT.

For those filing for Bankruptcy for the second or third time, the cost escalates but is typically still governed by the tariff.

The costs cover services such as:


  • Document preparation for signatures;
  • Notifying creditors of “stay of proceedings”;
  • Federal Government filing fee;
  • Two financial counseling sessions;
  • Preparation and submission of personal tax returns;
  • Monitoring of monthly income;
  • Court attendance, if necessary;
  • Reporting to creditors and filing of statutory documents with the Federal Government.


The Expense of a Consumer Proposal

Consumer Proposals have increasingly become the preferred mode for Canadians to seek respite from their creditors. Although governed by the same Federal Law, a Consumer Proposal is technically distinct from a Bankruptcy filing.

A Consumer Proposal is essentially an offer to repay a fraction of the debt to unsecured creditors over a certain period. The repayment is made into the LIT’s trust account, with the Proposal duration not exceeding sixty months (five years).

The amount offered in these proposals can vary and is influenced by factors such as:


  • Average monthly income;
  • Assets vulnerable to creditors;
  • Number of family members;
  • Daycare, medical expenses or support payments;
  • The amount a person wishes to repay.


Consumer Proposals are frequently accepted by unsecured creditors as they provide a slightly better recovery than projected bankruptcy recoveries.

The LIT’s fee in a Consumer Proposal is tariff-calculated and included within the proposal payments, meaning there is no additional fee payment.

Other Forms of Insolvency Filings

Apart from the above, LITs also handle several other types of insolvency filings:


  • Ordinary Administration Bankruptcy;
  • Division 1 Proposal;
  • Receivership;
  • CCAA – Companies Creditors Arrangement Act.


These filings are usually for a company or an individual with substantial assets. In these cases, LITs track their time and calculate their fees, akin to an accountant or a lawyer. At the end of the filing, the LIT presents the time charged to the involved parties and the Court for approval.

We are Here for You!

With escalating interest rates and inflation driving up the cost of living, financial burdens are becoming increasingly common. If you find yourself in such a predicament, do not hesitate to reach out to arrange for a no-cost initial meeting. No referral is required.

Our team will review your situation and provide advice on the best way forward. Before you realize it, your financial trajectory will start to improve.

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