What is a LIT (Licensed Insolvency Trustee)?
A Licensed Insolvency Trustee (formerly known as a Bankruptcy Trustee) is the only type of professional who is licensed and regulated by the Office of the Superintendent of Bankruptcy (OSB) to help Canadians get out of debt.
Licensed Insolvency Trustees (LITs) can help debtors file for bankruptcy or submit a Consumer Proposal to their creditors.
The initial meeting with an LIT is usually free of charge, and the Trustee will inform you during this consultation of all the options available to you, as well as help you to decide which route is the best for your specific financial situation.
Unlike credit counsellors and debt settlement businesses, which can only provide financial advice, LITs are able to offer advice and file insolvency proceedings on your behalf.
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Only a Licensed Insolvency Trustee can initiate the legal process of filing for bankruptcy, so if you’re considering bankruptcy as an option, you must go through a local Trustee to begin this process.
LITs are also federally licensed and regulated, meaning they must adhere to strict standards set by the OSB, follow the Code of Ethics for Trustees, and any complaint filed against them will be dealt with by the OSB.
Furthermore, the cost of working with an LIT is fixed by the Canadian government under the Bankruptcy and Insolvency Act (BIA), meaning that you will never overpay for services provided by a Licensed Insolvency Trustee.
If you are experiencing severe financial difficulties, speak to a Licensed Insolvency Trustee to assess your options and get professional help with getting out of debt.
There are local LITs throughout Canada, so you will always be able to find one nearby.
How does a Licensed Insolvency Trustee work?
If you’re considering bankruptcy or a Consumer Proposal, a LIT can:
- offer you financial advice in an initial meeting;
- help you calculate the value of your assets and the total amount of your debt;
- help you decide which solution is right for you: bankruptcy, Consumer Proposal, or another debt solution alternative;
- work with you to complete the process of filing for bankruptcy or submitting a Consumer Proposal;
- deal directly with your creditors on your behalf after the proposal or bankruptcy has been filed;
- provide debt counselling services to help you plan for your financial future after bankruptcy or a Consumer Proposal.
The role of an LIT is to find the best solution that works for both you and your creditors.
Schedule an appointment with a local Trustee to get advice on the most suitable option for your specific financial situation.
I’ve decided to file for bankruptcy – how can an LIT help?
To submit legal bankruptcy proceedings in Canada, you must go through a Licensed Insolvency Trustee.
Your Trustee will meet with you to explain the kinds of debt that can be discharged in a bankruptcy, as well as how long the process will take.
If you decide to proceed, your LIT will collect information from you to complete the forms required for declaring bankruptcy, and then file the necessary legal documents with the OSB.
Once these have been filed, you will be officially declared bankrupt.
After you have been declared bankrupt, your Trustee will notify your creditors about your bankruptcy and deal with them on your behalf to repay your debts.
You will stop making payments directly to your unsecured creditors, and any legal action they have taken against you will be halted.
Any non-exempt assets that you own will be sold or transferred to your LIT by filing an assignment in bankruptcy.
The proceeds from the sale of these assets will be placed into a trust managed by your LIT for the purpose of repaying your creditors.
After 9 months (for a first time bankrupt with no surplus income) a bankrupt receives their discharge automatically.
How do LITs handle Consumer Proposals?
If your debts total less than $250,000 (excluding secured debt from a mortgage on your primary residence), then submitting a Consumer Proposal to your creditors might be an alternative solution to declaring bankruptcy.
Once you and your local LIT have decided to proceed with a Consumer Proposal, your Trustee will help you put together a proposal for your creditors to agree on new conditions for the repayment of your debts.
The proposal will suggest that you repay a certain percentage of the total outstanding debt, request an extension of the loan repayment period, or a mix of the two.
Your Trustee will file the proposal with the OSB, and once this is done, your unsecured creditors can no longer collect from you or initiate legal proceedings against you.
Your creditors will have 45 days from the time of submission to determine if the proposal is suitable, and they may request a meeting of creditors to further assess your situation and your reasons for filing a Consumer Proposal, or to suggest changes to the proposal terms.
Although these meetings rarely take place for most insolvency filings, you will be required to attend if a meeting of creditors is requested.
Usually these meetings take place at the office of your local LIT.
After your creditors approve the terms of the proposal, you will begin making repayments to them through your Trustee.
Your Trustee will be the one responsible for disbursing payments to your creditors on your behalf.
Other services provided by LITs
After you file for bankruptcy or submit a Consumer Proposal, you will also have to attend two debt counselling sessions.
During these sessions, your LIT will help you understand the circumstances that led to your bankruptcy or proposal, and explain how budgeting, money management and building credit can improve your financial situation moving forward.
Bankruptcy and Consumer Proposals are intended to give debtors a fresh financial start, and these counselling sessions will ensure that you have the knowledge and tools to make the most of your fresh start.
Filing for bankruptcy is an important financial decision – and one that you don’t have to make alone.
Your local Licensed Insolvency Trustee is there to help you decide on the best course of action to get your finances back on track, and will support you in achieving your financial goals for the future.
