Licensed Insolvency Trustee / Trustee in Bankruptcy Basics

Licensed Insolvency Trustees: A Comprehensive Guide

Financial hardships can strike anyone, at any time. When faced with overwhelming debt, it’s crucial to understand all the available options. One avenue that often provides significant relief is working with a Licensed Insolvency Trustee (LIT). In this comprehensive guide, we will delve into the Licensed Insolvency Trustee Basics, exploring their role, authority, and services they offer.

What is a Licensed Insolvency Trustee (LIT)?

A Licensed Insolvency Trustee (LIT) is a federally regulated professional who provides advice and services to individuals and businesses experiencing financial difficulties. They are the only professionals authorized to administer government-regulated insolvency proceedings, such as consumer proposals and bankruptcies.

Eligibility and Training of LITs

To become a LIT, an individual must undergo a rigorous training program and pass a series of examinations. Many LITs are accountants by trade, specializing in dealing with debt. However, they are not employed by the Government of Canada.

What Authority Does a Licensed Insolvency Trustee Have?

LITs work with the Office of the Superintendent of Bankruptcy. They are licensed and monitored by referring to the Bankruptcy Act. They must also adhere to the Superintendent of Bankruptcy’s code of ethics. Their authority begins and ends concerning these regulations, designed to protect both debtors and creditors.

Bankruptcy and Insolvency Act

The Bankruptcy and Insolvency Act (BIA) is a federal piece of legislation that provides a legal framework for individuals and businesses struggling financially. It helps honest individuals cope with financial difficulties and protects the rights of both creditors and debtors.

Consumer Proposal and Bankruptcy Process

A LIT’s primary job is to help individuals execute consumer proposals and bankruptcies, both of which involve the use of the BIA. The process differs slightly depending on which option is effective.

Consumer Proposal Process

A consumer proposal is a legally binding process administered by a LIT. It involves offering to pay a portion of an overdue debt or extending the time when debts are due.

Under an accepted consumer proposal, you must abide by the conditions within the consumer proposal. If any assets remain, you can retain them, provided you make the appropriate payments.

Bankruptcy Process

Bankruptcy is a legal process that discharges most of your debts. Under bankruptcy, your assets and liabilities come under the full control of your LIT. Your LIT decides how to distribute the money among creditors to settle the debt.

When Should You Reach Out to a Licensed Insolvency Trustee?

Any individual suffering from financial issues can reach out to a LIT. They offer advice for any type of financial struggle. However, it is generally recommended to reach out to a LIT if considering a proposal or bankruptcy.

Opting for a Consumer Proposal

If you feel overwhelmed by your debt and have a steady income, a consumer proposal may be an option. If you want to maintain control over your assets, a consumer proposal is the better option.

Going the Bankruptcy Route

Bankruptcy is the most extreme option when discussing debt solutions. If you are unable to repay debts while covering basic needs, such as food and shelter, bankruptcy may be best.

Debt Management Program as an Alternative

Debt management programs (DMPs) are debt relief options that consolidate your debt. Compared to proposals and bankruptcies, DMPs have much less severe consequences on credit.

How are Licensed Insolvency Trustee Fees Determined?

The fees charged by an LIT are regulated by the federal government. Typically, LITs do not charge for the first consultation. The exact rules that control how Licensed Insolvency Trustee fees are determined can be found here.

Final Thoughts

Licensed Insolvency Trustees can help you with a range of debt solutions. If you are struggling with debt, consider reaching out to a LIT to get some advice. While a proposal or bankruptcy may seem extreme, it is worth it if you come out debt-free.

Remember, when seeking financial advice and services, it’s crucial to consult with a qualified professional. When you choose to work with a Licensed Insolvency Trustee, you are dealing with someone who has demonstrated the knowledge, experience, and skills necessary to provide debt solutions.

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