Who Does What In A Bankruptcy and a Consumer Proposal?
Learn About How The Insolvency (Bankruptcy or a Consumer Proposal) Process Works
Understanding the insolvency process will help you understand who does what in a bankruptcy and a consumer proposal.
The roles of each party involved in the insolvency – a consumer proposal or bankruptcy – is well defined.
This article will help you understand what a debtor, creditor, and a trustee is and what their roles are in the insolvency process.
Who are the Main Parties Involved In a Bankruptcy or a Consumer Proposal?
Creditor – The company or individual that has loaned money to the debtor. Creditors can be anyone – a credit card company, your bank, a personal loan lender or a family member.
Debtor – A person who owes money. The debtor will be in financial trouble if they are considering bankruptcy or a proposal.
Trustee – A Trustee is an individual licensed by the government to administer to bankruptcies and consumer proposals. A Trustee is a very highly trained and experienced debt relief expert. Only a Licensed Insolvency Trustee (known as a bankruptcy trustee before April 2016) is regulated and licensed by the government.
A Trustee is also licensed by the government. In order to become a Trustee, a person must have a university degree and pass many courses.
In addition, Trustees must be interviewed by a Board of Examiners and pass an RCMP investigation before they can get their Trustee licence.
What is the Trustee’s Role in a Bankruptcy or a Consumer Proposal?
The Trustee’s role in an insolvency is to ensure the rules are followed, and that the creditors and bankrupt does what they are supposed to do.
The Trustee will work as a representative of the debtor, although they will not work for the debtor, or any of the creditors.
Your Trustee is an Officer of the Court. The Trustee that you decide to work with will guide you through the entire insolvency process, from initial consultation to when you receive your discharge or get your certificate of completion.
When you meet with your Trustee, they will help you decide if bankruptcy or a consumer proposal is the right debt relief method for you.
Once they have prepared your paperwork, they will submit the necessary forms and documents with the government.
What Role Does the Debtor Have During Bankruptcy or a Proposal?
During their bankruptcy or proposal case, the debtor must complete their duties and make payments.
The main duties are to make the necessary payments and attend two credit counselling sessions.
These sessions will be completed with the Trustee and possibly other debtors.
It is mandatory that a bankrupt debtor attends two credit counselling sessions.
A person making a consumer proposal will also be required to attend two sessions with their Trustee.
At these sessions, your Trustee will help you understand the causes of your financial problems.
The Trustee will give you the tools and skills you need to avoid financial problems in the future.
The Trustee will help you learn money management skills and will give you budgeting tips.
The purpose of these bankruptcy counselling sessions is to give a person “tools and skills to move forward and make the best use of their fresh financial start.” You will be able to move on with your life.
Although it is possible you can complete your sessions with a group of other debtors and your Trustee, we recommend attending sessions one-on-one.
What is the Role of the Government in an Insolvency Case?
Furthermore, during a debtor’s insolvency process the government will have a role to play.
In Canada, the OSB (Office of the Superintendent of Bankruptcy) will enforce the Bankruptcy and Insolvency Act.
This will ensure that the rules are followed by the Trustee, creditors and the debtor involved.
The OSB is the government agency that reviews all insolvency (bankruptcy / consumer proposal) files and checks all rules.