No one wants to retire in debt. But if you are one of the growing…
Financial problems can feel overwhelming and confusing. If you’re contemplating Bankruptcy, you might not know where to turn or who to call for help. Should you speak to a Bankruptcy lawyer, a Bankruptcy Trustee, or a Licensed Insolvency Trustee? What’s the difference between these three professionals, and who is best suited to help you with your debt problems?
When in Debt, Who Should I Call?
When you’re deep in debt and you need help, your first call should be to a Licensed Insolvency Trustee (LIT). An LIT is a federally regulated professional who is qualified to provide advice and services to individuals and businesses facing debt problems.
Licensed Insolvency Trustees are the only professional in Canada authorized to administer government-regulated insolvency proceedings, including Consumer Proposals and Bankruptcies. A Licensed Insolvency Trustee is also referred to as a Bankruptcy Trustee. These terms are interchangeable and mean the same thing. The Office of the Superintendent of Bankruptcy (OSB), which is responsible for licensing and governing Trustees, changed the name from Bankruptcy Trustee to Licensed Insolvency Trustee in 2015 in Directive No.33.
A Bankruptcy lawyer is not the same as a Bankruptcy Trustee or a Licensed Insolvency Trustee.
What is a Bankruptcy Lawyer?
A Bankruptcy lawyer specializes in legal matters of Bankruptcy and Insolvency, but they are not able to initiate a Bankruptcy or Consumer Proposal nor can they administer a proceeding. When a Bankruptcy lawyer is involved in a Bankruptcy case, it is almost always a corporate business case. The lawyer is there to provide legal advice and argue on behalf of their client.
Why Would I Hire a Bankruptcy Lawyer?
In most Bankruptcy cases in Canada, it is not necessary to hire a Bankruptcy lawyer. You file for Bankruptcy with an LIT, who guides you through the entire process. The only time you might need a Bankruptcy lawyer is if you are dealing with a highly combative case or if someone breaks the law. When a Bankruptcy lawyer is required, it is more often in a business Bankruptcy case, as opposed to personal Bankruptcy.
In the U.S., it’s common for those filing for personal Bankruptcy (Chapter 7 or Chapter 13) to hire a lawyer to help with their case. Bankruptcy lawyers help clients decide if they should file for Bankruptcy and, if so, under which chapter. Lawyers can also provide advice on which debts can be discharged, what assets you can keep, and how the overall Bankruptcy process works. While it is possible for individuals to file for Bankruptcy without an attorney (called “filing pro se”), the United States Courts recommend that individuals hire a lawyer.
In Canada, a lawyer is not required, and most people don’t need one because an LIT can answer all questions and assist you through every step of the Bankruptcy process.
What’s the Difference Between a Bankruptcy Lawyer and a Licensed Insolvency Trustee (LIT)?
One of the most important differences between a Bankruptcy lawyer and an LIT, is that a Bankruptcy lawyer cannot file a Bankruptcy for you in Canada. An LIT is the only professional in Canada able to administer a Bankruptcy or Consumer Proposal.
Unlike Bankruptcy lawyers, LITs are regulated by the OSB and follow a set of general rules outlined by the Bankruptcy and Insolvency Act (BIA). This means everything an LIT does has to follow the rules set out by the federal government, including how much an LIT can charge to administer a Bankruptcy or insolvency proceeding. Lawyers can charge as much as they want. With an LIT, you never have to worry that you are paying too much.
When you contact a Licensed Insolvency Trustee, they are equipped to help you decide if Bankruptcy is even the right option for you. There are other debt relief and debt management tools that might allow you to avoid filing for Bankruptcy.
What is an LIT’s role in the Bankruptcy Process?
If you and your LIT determine that Bankruptcy is the right debt relief option for you, the LIT will guide you through the entire process and answer any questions you have along the way. In most personal Bankruptcy and Consumer Proposal cases, a Licensed Insolvency Trustee is the only professional you need. Some of the specific tasks an LIT takes on include:
- Preparation and filing of Bankruptcy documents
- Notifying your creditors of the insolvency filing
- Dealing directly with your creditors on your behalf
- Selling your assets and holding the money raised in trust for distribution to your creditors
- Applying for discharge so you can be officially released from your debts
When to Contact a Licensed Insolvency Trustee
As soon as your debt begins to feel uncomfortable, you can reach out to an LIT to discuss your debt problems. An LIT can walk you through the debt relief and debt management options and help you decide which one is right for you. From credit counselling to Consumer Proposals and Bankruptcies, an LIT offers expertise across the entire spectrum of debt help.
While there are some specific situations where a Bankruptcy lawyer might be beneficial or needed, in the majority of personal Bankruptcies, this is not the case. Your first call should always be to a LIT.
At Adamson & Associates Inc., we understand how stressful debt can be and we are here to help you navigate through it. If you’re ready to speak with a Licensed Insolvency Trustee about your debt issues, give us a call at 519-310-JOHN (5646) or contact us online for a free, no-obligation consultation.