In the United States, bankruptcy is a relatively complicated and expensive process that practically forces you to hire a bankruptcy attorney.
Fortunately, in Canada, those who are insolvent and owe a minimum of $1,000 can work with a licensed insolvency trustee (trustee in bankruptcy) to get the fresh start they need.
A bankruptcy trustee is a professional who has been licensed by the Canadian government to administer a bankruptcy or consumer proposal.
All licensed trustees are listed on the Superintendent of Bankruptcy website, so if you need to verify that you’re working with an actual trustee, you can check the OSB website.
It is important to distinguish between bankruptcy trustees and debt consultants.
The latter are not licensed or regulated, so they cannot file your bankruptcy or consumer proposal.
Their fees are also not set by the government, so you could pay a lot more only to be advised to see a trustee anyway.
While what they do is not illegal, it may not benefit anyone who knows they are insolvent and that bankruptcy is the only viable solution.
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How Does a Trustee Get Licensed?
In Canada, bankruptcy trustees have to complete an extensive training program that includes hands-on experience in debt management.
Depending on the individual trustee’s prior qualifications, this education period lasts anywhere from two to five years.
They are then required to appear before an Oral Board of Examiners, which sits once a year, and pass the exam.
Given that only 50% of applicants pass, obtaining a trustee license is a sign of experience, knowledge, and high professionalism.
What Does a Trustee in Bankruptcy Do?
Many people fear that if they seek a consultation, the trustee will try to persuade them to file bankruptcy.
In realty, bankruptcy trustees are obligated to review all possible debt relief options for your situation.
They also don’t “work for” your creditors: they are independent administrators who work to make the process as fair as possible for both sides.
When you meet with a trustee, they will review your financial situation, explain all available remedies, and answer any questions you may have.
They will also be honest about any long-term ramifications of the remedy you choose, such as the effect on credit and the importance of maintaining a consumer proposal payment schedule.
If you decide to file bankruptcy or make a consumer proposal, your trustee will prepare the paperwork, explain the contents, and answer any questions you have before signing.
After you sign, they will:
- Notify your creditors and process their claims.
- Contact your employer if your wages are being garnished and provide documents to stop the garnishment.
- Ensure that you attend the required credit counseling sessions.
- Chair the meeting of creditors if one becomes necessary.
- Fairly distribute any funds received from the administration of the estate. This includes selling any nonexempt assets if you file bankruptcy and distributing the proceeds to your creditors.
In the end, your bankruptcy trustee will also apply for your discharge after you have completed the terms of your bankruptcy or consumer proposal, leaving you free to start over.
If you feel that debt has overwhelmed your life, a licensed insolvency trustee will use their knowledge and insights to recommend the best solution for you.
If you opt for bankruptcy or a consumer proposal, they will provide the guidance you need to make the most of this second chance.