Licensed Insolvency Trustee in Canada: What a LIT Does & How They Help You

What Is a Licensed Insolvency Trustee?

A Licensed Insolvency Trustee (LIT) is a debt professional who is licensed and regulated by the Office of the Superintendent of Bankruptcy (OSB), a branch of the Government of Canada. LITs are officers of the court and must follow strict ethical, educational, and professional standards.

Key points:

• They are the only professionals in Canada legally authorized to administer consumer proposals and personal bankruptcies under the Bankruptcy and Insolvency Act.
• They must provide impartial advice on all of your options — not just bankruptcy.
• They are subject to government oversight, audits, and a professional code of ethics.

You can verify any LIT in the federal Licensed Insolvency Trustee Registry.

What Services Does a Licensed Insolvency Trustee Provide?

Licensed Insolvency Trustees offer a full range of debt relief and restructuring services for individuals and businesses.

For Individuals (Consumers)

• Free initial consultation: Review of your income, assets, debts, and goals.
• Debt assessment: Analysis of options such as budgeting changes, debt consolidation, Debt Management Plans, consumer proposals, and bankruptcy.
• Consumer proposals: Preparing and filing a legally binding offer to your creditors so you can repay only a portion of your unsecured debts with no interest.
• Personal bankruptcy: Administering bankruptcy when debts are unmanageable and there is no feasible way to repay them.
• Stopping collections: Filing a proposal or bankruptcy triggers a stay of proceedings, halting most collection actions, wage garnishments, and lawsuits.
• Financial counselling: Mandatory sessions to help you rebuild your finances and avoid future problems.

For Businesses

• Business viability assessments and turnaround advice.
• Corporate proposals and restructuring plans.
• Receiverships and business bankruptcies.

The Financial Consumer Agency of Canada describes the role of LITs and how they help Canadians deal with serious debt.

How Are Licensed Insolvency Trustees Regulated in Canada?

LITs are licensed and supervised by the Office of the Superintendent of Bankruptcy (OSB), under the Bankruptcy and Insolvency Act (BIA).

Regulation includes:

• Educational requirements and professional training (often including the Chartered Insolvency and Restructuring Professional — CIRP — designation).
• Background and integrity checks before licensing.
• Ongoing professional development and compliance requirements.
• Periodic monitoring, audits, and inspections by the OSB.
• Complaint and discipline processes if a trustee does not meet professional standards.

This strict regulatory framework protects consumers and ensures that Licensed Insolvency Trustees act in accordance with the law and professional ethics.

When Do You Need a Licensed Insolvency Trustee?

You should consider speaking with a Licensed Insolvency Trustee when:

• You are missing payments, using one form of credit to pay another, or living in your overdraft.
• You are getting collection calls, wage garnishments, or legal threats.
• You owe CRA tax debt or government debts you cannot pay in full.
• You have been turned down for debt consolidation or a consolidation loan will not be enough.
• Your total debt is so high that you cannot reasonably repay it in a few years, even with lower interest.

In these situations, a LIT can explain whether a consumer proposal, bankruptcy, or another solution is the most appropriate path to a fresh start.

Licensed Insolvency Trustee vs Credit Counsellor vs Debt Consultant

In Canada, many different organizations advertise “debt relief.” It is essential to understand the differences between a Licensed Insolvency Trustee, a non-profit credit counsellor, and an unregulated debt consultant.

The Government of Canada warns consumers about unregulated “debt relief” companies that charge large fees without providing the same legal protections as a consumer proposal or bankruptcy. See: Struggling with debt? Beware of debt-relief scams.

Fees, Process, and What to Expect When Working With a Licensed Insolvency Trustee

Step 1: Free Confidential Consultation

Most LITs offer a free initial consultation. During this meeting, they will:

• Review your income, expenses, assets, and debts.
• Explain all of your options: budgeting, consolidation, credit counselling, consumer proposals, and bankruptcy.
• Answer your questions and outline realistic next steps.

Step 2: Choosing the Right Option

If a formal solution is needed, your LIT will help you decide between a consumer proposal and bankruptcy based on:

• Your income and household budget.
• Your assets (home, car, RRSPs, RESPs, investments).
• The type and amount of your debts (credit cards, tax debt, student loans, etc.).
• Your long-term financial goals.

Step 3: Filing a Proposal or Bankruptcy

If you choose a consumer proposal or bankruptcy, the LIT will prepare the required documents, file them with the OSB, and notify your creditors. This filing creates a legal stay of proceedings, which usually stops collection calls, wage garnishments, and most lawsuits.

Step 4: Completing Your Duties

You will have to:

• Make regular payments as agreed in your proposal or bankruptcy.
• Attend two financial counselling sessions.
• Provide information and documents as requested by the LIT.

How Are LIT Fees Set?

In consumer proposals and bankruptcies, LIT fees are set by federal regulations and come out of the money you pay into your proposal or estate. You do not pay extra fees on top of what you are already paying to settle your debts.

How to Choose the Right Licensed Insolvency Trustee

Not all LITs or firms are the same. Here are a few tips for choosing the right trustee for you:

1. Verify Their License

Use the official OSB LIT Registry to confirm they are properly licensed.

2. Look for Clear Explanations and Options

A good LIT will:

• Explain all of your options, including non-insolvency solutions.
• Take time to answer your questions in plain language.
• Make sure you understand the consequences of each option.

3. Consider Experience and Local Knowledge

Choose a trustee who understands provincial laws (such as asset exemptions) and has experience with cases similar to yours (e.g., CRA debt, self-employed income, small business owners).

4. Trust Your Instincts

You should feel respected, not pressured. If you ever feel pushed to make a quick decision without understanding your options, consider a second opinion.

You can use our Find a Local Trustee tool to connect with a Licensed Insolvency Trustee near you for a free, confidential consultation.