Licensed Insolvency Trustees (“LIT”) are federally-regulated professionals trained and experienced in helping people get the fresh financial start they deserve. Previous to 2016 these financial professionals were known as Bankruptcy Trustees – which did not reflect the true nature of what a LIT does – however the professional designation was changed to Licensed Insolvency Trustee which better reflects the wholistic nature of the services LITs provide.

Frederick & Company Ltd. is a boutique firm that is passionate about helping people overcome debt struggles and develop healthy financial habits by providing real help and tailored options.

Whether you’re here to learn more about how a Licensed Insolvency Trustee can help you, or you want to know how to become one yourself, Frederick & Company is here to provide you with this guide that will answer all of your questions:

What Is a Licensed Insolvency Trustee?

A License Insolvency Trustee is a federally regulated professional that provides services and advice to individuals and businesses with debt issues.

They help people make informed decisions when it comes to their financial struggles by helping them understand their legal obligations, risks, and cash flow so they can make an educated choice about how to manage their debt moving forward.

LITs are responsible for reviewing all options available to debtors to resolve their financial difficulties. A Licensed Insolvency Trustee is mandated to provide a comprehensive list of options such as budgeting and continuing payment agreements, refinancing, consolidation loans, second mortgages, as well as formal restructurings through orderly payment of debts, bankruptcy and consumer proposals. This consultation reviewing your options should be focused on educating you on your options and the pros and cons of each option given your currently unique circumstances.

Licensed Insolvency Trustees deal directly with creditors to review the claims and negotiate proposal payments as well as ensuring that unsecured creditors cannot continue to collect or initiate legal proceedings against you.

LITs are granted a license to practice from the Office of the Superintendent of Bankruptcy (“OSB”), so they are highly skilled, knowledgeable, and experienced.

Because Licensed Insolvency Trustees are federally regulated, they must follow federal standards of practice and are overseen by the OSB on a regular basis.

The Difference between a LIT and a Debt Consultant

Many people think LITs and debt consultants are the same thing however this is incorrect.

Licensed Insolvency Trustees will review all your financial options and help you make an educated decision about which option is best for you at no cost to you.

LITs are the only professionals that are authorized to administer government-regulated debt solutions, such as consumer proposals, or bankruptcies, that extinguish your legal obligation to pay dischargeable debts. As a result Licensed Insolvency Trustees are the best positioned professionals to advise you about the details of a proposal or bankruptcy as we are the only professionals that administer these proceedings and therefore have hands-on practical knowledge of these processes. The difficulty in seeking out the advice from a debt counsellor or debt consultant is they typically only witness the start of a bankruptcy or proposal before they refer individuals over to a Licensed Insolvency Trustee. They cannot understand the implications of the entire process because they do not engage with the whole process and as such do not see the outcomes that have a direct impact on their clients.

Debt consultants and debt counsellors are not created equal – they are not regulated and their services and fee structure can be quite different. It is important to understand what services are being provided for what cost.

Some debt consultants will charge a fee only if they are successful in negotiating an informal settlement for their clients – this is a clear value for their clients and is a legitimate option available to settle your debts with creditors.

Other debt consultants or counsellors will charge a fee for a review of your financial situation – similar to the no cost evaluation a LIT would perform. These consultants may be providing additional value as well but that too will vary between debt consultants so it is important to ask what services are offered. Debt consultants will refer some of these clients to a Licensed Insolvency Trustee for a consumer proposal or a bankruptcy as noted above.

How to Become a Licensed Insolvency Trustee

In order to become a Licensed Insolvency Trustee, you must have a Canadian university degree or five years of relevant experience in the insolvency field.

Additional requirements for becoming a Licensed Insolvency Trustee include not having a record of any criminal or economic offenses (without pardon) and maintaining a good reputation.

It is also important that candidates are considered solvent and have not claimed bankruptcy in the last five years.

The OSB is dedicated to ensuring that trustees do not negatively impact the public’s perception of the insolvency process. Potential trustees must also prove their abilities, skills, professionalism, judgment, understanding, and work ethic through the course work and examinations required to achieve the professional designation.

Licensed Insolvency Trustee Training

Those looking to become a Licensed Insolvency Trustee must successfully complete the CIRP Qualification Program (CQP) in order to obtain their license to practice.

This course is offered by the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).

Potential trustees must also complete the Insolvency Counsellor’s Qualification Course provided by CAIRP.

The final step in becoming a Licensed Insolvency Trustee is to pass an oral board exam.

How Do Licensed Insolvency Trustees Make Money?

The fees earned by LITs are set by Bankruptcy and Insolvency Act. The fees charged by Licensed Insolvency Trustees are based on set calculations. The financial circumstances of each person filing a bankruptcy or proposal are different and as such the fees will vary as well but the calculation used to determine the fees are the same for each file.

Licensed Insolvency Trustees do not charge a fee for service, so they do not invoice their clients for their time.

This means that there is no direct charge for a LITs time so you do not have to worry about being charged for requests for ongoing support or inquiries made.

How to Choose a Licensed Insolvency Trustee

If you are facing debt problems and don’t know what else to do, it is helpful to look for a Licensed Insolvency Trustee near you. There are LITs across Canada who may be advertising in your area so make sure your LIT has an office in your province or region so they know the realities of your specific circumstances.

It is also important to choose a Licensed Insolvency Trustee who makes you feel comfortable and takes your unique situation into consideration. Even though LITs are hired and regulated by the OSB, their reputations may vary.

Here are some other things you should consider when choosing a Licensed Insolvency Trustee:

  • Are they focused on educating and empowering you or telling you what to do? When a LIT is focused on educating you they are ensuring you personally have an understanding of your situation, the potential outcomes of each option you could choose but they leave the decision of which option to choose to you. It is important that you are educated and empowered to make this decision for yourself because only you know your values, the compromises that are acceptable for you, and the considerations you find important. Anyone that tells you what you ought to do can only consider it from their own perspective and while they may have good intentions this approach does not empower you to make the decision yourself – you are at the whim of the judgment of the person advising you. It takes considerably more time to educate than to advise – make sure you aren’t dealing with a firm that takes a shortcut and jumps straight to telling you what to do.
  • Do they understand provincial nuances? While federal legislation offers all Canadians access to debt relief, the application of the law is also governed on a provincial level. Your LIT must have local knowledge and experience to accurately file your proposal according to your unique jurisdiction. Do they inherently understand the regional considerations such as the current economic conditions, job market, or real estate market that comes from living in a province or region that directly impacts your financial situation? If the answer is no then you may want to find someone local to deal with.
  • Can they provide local referrals? Your financial recovery may benefit from including a third-party service, such as a mental health professional, lawyer, or credit counselor. Although LITs don’t have any formal partnerships with local organizations, they should be able to refer you to trustworthy organizations that can provide further support.
  • Do they empathize with your experience? Even though LITs must look at your situation objectively, they also need to take into consideration why or how your situation came to be in order to provide you with the best chance at a fresh financial start. A LIT is required to consider the personal circumstances to your situation when considering possible options to resolve your financial difficulties. You are going to be working together for years so you need to feel comfortable to share your concerns without feeling judged.

Another thing you may want to take into consideration is whether or not the Licensed Insolvency Trustee is willing to meet with you in person.

Although insolvency proceedings can be done virtually, you may feel more comfortable discussing your financial issues in person. Also some conversations – such as understand how the surplus income calculation works – can be more easily understood when you are sitting side-by-side for that review. Check to see how the LIT will accommodate your desire to meet in person should you feel that is necessary at some point during the process.

How to Find a Licensed Insolvency Trustee

To find a Licensed Insolvency Trustee to help you figure out your debt problems you can:

  • The Canadian Association of Insolvency and Restructuring Professionals (“CAIRP”) is the National Association for LITs and their website includes a list of LITs that are part of this association which indicates they are committed to continuing their education and have completed ongoing professional development and they are held to higher industry standards and ethics than those LITs that do not choose to be part of this association. Checkout the CAIRP list of LITs here.
  • Try the Government of Canada’s searchable database. The Government of Canada makes their database of all LITs in the country accessible so LITs can be easy to find one in your area.

What about using google?
When you use google to search “Licensed Insolvency Trustee”, “bankruptcy”, “consumer proposals” etc. make sure you cross reference the firm you find on google with either of the above databases. If the firm is not listed above that likely means they are a debt consultant or debt counsellor or even a lead generating website. If they are not a Licensed Insolvency Trustee they are:

  • Not licensed by the federal government
  • Not federally regulated
  • Not mandated to review all your options at no cost
  • Not bound by federally outlined in the code of ethics in the Bankruptcy and Insolvency Act
  • Not bound by the additional higher professional standards set out by CAIRP

When you meet with a LIT you are not obligated to take any further steps – such as filing a consumer proposal – it should be a process of getting educated and empowered to learn your options.

How Many Licensed Insolvency Trustees Are in Canada?

In Canada, there are over 200 different insolvency trustee firms and over 1,000 individual trustees.

You’ll find LITs located in every major city across Canada.

Licensed Insolvency Trustee Alberta

At Frederick & Company Ltd. we are a Licensed Insolvency Trustee in the Edmonton area and our trained debt relief advisors are dedicated to helping people understand their financial problems and provide options to resolve their debts with empathy.

We understand the worry and stress that comes with financial problems, which is why we offer free consultations to those seeking financial education and empowerment.

Whether you are looking for help with your debt or you are interested in becoming a Licensed Insolvency Trustee, you can always contact us for more information!