What is the role of a Licensed Insolvency Trustee (formerly Trustee in Bankruptcy)?
A Licensed Insolvency Trustee (LIT) is a person who is licensed by the Government of Canada to administer proposals and bankruptcies in Canada. This is important as trustee’s are the only professionals who are licensed by the federal government to properly advise you about all the options available to consumers when they realize they are unable to pay their debts as they become due.
The challenge with describing the role of the trustee, is that it is very broad. At the most basic level the role of a trustee is to:
- Ensure consumers understand all the options that exist to deal with their debt.
- Ensure consumers understand the advantages and disadvantages of each of these options.
- Ensure consumers understand what their expectations should be with each of the options.
- Ensure the consumers’ situation is properly reviewed and the impacts of any unique aspects of their situation are addressed.
- Assist with the preparation of the documents necessary for filing.
But the role of the trustee goes much further than just these initial duties, as they are also required to:
- Ensure the validity of creditors’ claims.
- Ensure that both debtors and creditors adhere to the requirements imposed by the Bankruptcy & Insolvency Act (BIA) and related statutes.
- Ensure proper insolvency counselling is provided in accordance with the standards provided by the BIA.
- Properly calculate surplus income and if there is a dispute, adequately provide access to mediation services.
- Properly conduct all administrative duties associated with any bankruptcy or formal restructuring are and done so in a timely manner.
- Request, when eligible, discharge from the court and assist with the associated applications.
As you can see, the role of a trustee is quite varied and impacts many different parties. One of the most common misconceptions about a trustee is that they work for the creditors. Many of the unlicensed debt advisors and consultants will build their advertising around this concept of the trustee working for the creditors. The problem is that this is not entirely correct. The trustee is an officer of the court and as such has a duty to many different stakeholders. A trustee has an obligation to ensure that the debtor is properly informed, just as he is required to ensure that the claims submitted by creditors are valid and enforceable. The way I describe this role is that the trustee is like the referee at a hockey game. There are two different teams, one set of rules, and the trustee is required to make sure that the rules are followed properly. As any good referee a great deal of energy is spent ensuring that those rules are properly explained, and administered in a consistent and reliable fashion. Just as a referee has an obligation to make sure both teams follow those rules, a trustee is required to make sure both creditors and debtors do likewise.
To summarize, the trustee is the only debt professional licensed by the federal government to advise people about all the options that exist when unable to pay their debts. Yes, the trustee has a duty to both debtor and creditor alike, but this role is best managed through proper education. If the trustee takes the time to properly advise and assist the debtor, the vast majority of problems or difficulties can be avoided. It is when information is received from an unqualified and often unreliable source that potential problems can be magnified.
If you are unsure where to turn to get advice about how to handle your debt, call a trustee!