Every year, thousands of Canadians find themselves buried under a mountain of unsustainable debt, often through no fault of their own.
In situations like these, they need qualified, accredited professionals who can reduce their debts through legal facilities, like bankruptcy.
But who are these professionals?
And how can they help you out of a financial predicament?
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What Is A LIT (Licensed Insolvency Trustee)?
In the past, professionals with the legal authority to assist their clients in filing for bankruptcy were called bankruptcy trustees.
In April 2016, however, the government legally changed the name to licensed insolvency trustees or LIT for short.
Despite the name change, LITs retain all the same responsibilities as bankruptcy trustees.
Just as before, they have the legal authority to administer laws according to the Bankruptcy and Insolvency Act (1985).
They can still help their clients file for bankruptcy and retain the legal right to operate as administrators during consumer proposals.
The reason for the name change has to do with perceptions and stigma.
The term “bankruptcy” can have negative connotations.
Calling professionals “bankruptcy trustees” could put people off from choosing their services, even if they stand to benefit.
Furthermore, the naming convention doesn’t adequately convey the work that they do.
While they facilitate bankruptcy, they also offer other services to help people deal with insolvency.
Fundamentally, though, working with a licensed insolvency trustee is identical to working with a bankruptcy trustee, save for the change in name.
LITs are different from credit counsellors or debt advice services.
Unlike voluntary options, they have the legal authority to push bankruptcies through courts and create binding agreements with creditors.
LITs are not just a service for people with low incomes, either.
Many people assume that only the poor get into financial trouble, but that isn’t true.
With higher incomes comes the ability to get into more debt, meaning insolvency can affect anyone, including those on high salaries.
Licensed insolvency trustees, therefore, present you with a menu of options based on your circumstances.
It is their job to get to the bottom of your financial troubles and chart a course to financial health.
Sometimes that road will involve filing for bankruptcy, but not necessarily.
Even if your debts are unsustainable, you still have other options.
How A Licensed Insolvency Trustee Can Help You
Licensed insolvency trustees are not-for-profit professionals who offer consulting services and legal assistance for those in financial difficulty.
Most often, they are compassionate people who understand that you did not get into debt deliberately.
Their role is to support you financially and help you feel better about your predicament.
They give you hope.
Review Your Finances
Soon after meeting your LIT, they will review your finances with you.
You’ll discuss your income, current debts, assets, and anything else related to your ability to repay, such as household expenses.
Once they have this information, the LIT will provide their view on your financial situation and the route you should take out of it.
Their recommendations are personalized, meaning that any plan you receive is specifically designed for you.
LITs are expert advisors who help with all kinds of common money problems.
These include missing utility bill payments, going over credit card spending limits, and borrowing money until your next payday.
Explore Voluntary Settlements
You don’t always have to use legal facilities, such as bankruptcy or consumer proposals, to reduce your debt burden and take back control of your finances.
Sometimes, you can get a voluntary debt settlement where creditors agree to reduce your interest rate or waive any late fees you may owe.
You can also explore debt consolidation with your LIT.
Here, you receive a cash lump sum to pay off all your high-interest debts and then repay a single creditor at a substantially lower rate.
These products allow you to pay back the money you owe in full, without long-term blemishes on your credit report.
Please note that LITs help both their clients and creditors.
Left to your own devices, you may struggle to work out a plan to repay as much of the debt you owe as you reasonably can.
With a LIT, though, you can find solutions that benefit both parties while protecting your best interests.
Stop Collection Calls And File A Consumer Proposal
A consumer proposal is a legally-mandated tool that you can use to substantially reduce the amount of money you owe creditors.
Once you file, lenders are no longer allowed to chase you up for late payments.
Instead, they must go through your licensed insolvency trustee.
A consumer proposal is a form of negotiation with legal backing.
Your LIT approaches creditors on your behalf with an offer to reduce the amount of money you owe.
Lenders must then vote on whether they should accept the terms or not.
If creditors representing more than 50 percent of the debt agree to the offer, they all must.
Mostly, banks, personal loan companies and finance operations will agree to the terms of your consumer proposal.
If they don’t, you may file for bankruptcy, and they will get nothing.
File For Bankruptcy
Some people ask their LITs to help them file for bankruptcy, though this is often seen as a last resort.
Bankruptcy writes off qualifying debts you accumulated so far and gives you a fresh financial start.
Your LIT will explain both the pros and cons of the process to you in detail so that you understand what it entails.
Once you file, creditors must stop harassing you for money and can only communicate indirectly with you through your licensed insolvency trustee.
You also get to keep some of your assets, including your home, in most cases.
You become eligible for bankruptcy when you owe more than 1,000 CAD, have debt that exceeds the value of your assets, and can no longer satisfy obligations when they become due.
If you are struggling with unsustainable debts, speak with a licensed insolvency trustee.
They can help you plot a course out of your money worries and get on the path to financial health.