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Both a consumer proposal and bankruptcy are legal actions and therefore must be filed by a Licensed Insolvency Trustee. Trustees are Officers of the court and are the sole debt relief professionals legally allowed to file either of these procedures. 

Generally speaking, most Licensed Insolvency Trustees either work for themselves or are a member of a firm. They must adhere to the laws and regulations laid out in the Bankruptcy and Insolvency Act.

What Is A Licensed Insolvency Trustee?

Licensed Insolvency Trustees are regulated by the Office of the Superintendent of Bankruptcy Canada, a branch of the federal government. They are professionals who have gone to school and are trained to oversee the filing of consumer proposals and bankruptcies in Canada. Trustees are also the only debt relief professionals who are required to explain all your options. Working with a Licensed Insolvency Trustee does not mean you have to file for bankruptcy. 

What Training Do License Insolvency Trustees Recieve In Canada?

 A LIT can receive a license upon completion of certain training and stringent educational/learning requirements, followed up by an oral board examination in front of a panel.  The panel typically consists of someone from the OSB, a lawyer, and another Trustee. The process of obtaining one’s license is very involved and requires discipline and knowledge.  

How To Find A Licensed Insolvency Trustee?

The government of Canada provides an online directory to help you find an active Licensed Insolvency Trustee. You can search by name or location, or browse all active LITs near you.

What Debt Relief Options Do Licensed Insolvency Trustees Offer?

Licensed Insolvency Trustees work one-on-one with Canadians who are in need of debt relief, assess their financial situations, and help them make informed decisions. While all Trustees offer both consumer proposals and bankruptcies, they can also offer advice and provide solutions to help you tackle your debt on your own. 

Step 1: Consultation

The first meeting you have with your Licensed Insolvency Trustee is called a consultation and it’s free. Your Trustee will go over your financial situation, assess any issues you’re having with debt repayment and then determine what your next step should be.

Step 2: Choosing Your Debt Relief Option

Not everyone who meets with a Trustee needs to file a consumer proposal or bankruptcy; therefore your Trustee may suggest other less drastic options that you can do on your own. But if you and your Trustee decide that filing a consumer proposal or bankruptcy is your best option, here’s what you can expect:


Your Trustee will always make sure that filing for bankruptcy is absolutely necessary before they proceed. They will guide you through the whole process and make sure your rights are being respected.

Consumer Proposal

Based on your financial situation and whether or not you have any assets that you want to keep, your Trustee might recommend that you file a consumer proposal instead of filing for bankruptcy. Your Trustee will guide you through the process and deal with your creditors on your behalf.

What Happens During A Bankruptcy Process?

During the bankruptcy process, you can expect:

  • Your Trustee will perform a debt assessment to make sure bankruptcy is the right choice for you.
  • You will sign the necessary paperwork to declare bankruptcy and they will be filed with the government.
  • A stay of proceedings starts and your creditors can no longer request repayment.
  • Next, you must complete all your bankruptcy duties…
    • Update your Trustee with your monthly budget/ income
    • Make your monthly payments
    • Attending two credit counselling sessions
    • In general, keep in contact with your Trustee

Within nine months, your bankruptcy should be discharged and the majority of your eligible debts cancelled. Your bankruptcy will remain visible on your credit report for a minimum of six years.

What Happens During A Consumer Process?

During the process you should expect:

  • Your Trustee will suggest a repayment plan that you can afford and that is appealing to your creditors.
  • A proposal is created, signed by you, filed with the government, and then sent to your creditors.
  • A stay of proceedings starts and your creditors can no longer request repayment.
  • Once you present your proposal to your creditors they will have 45 days to accept or reject the proposal or ask for a meeting.
  • If your proposal is accepted you need to start making payments right away and attend at least two credit counselling sessions.

Advantages Of Working With A Licensed Insolvency Trustee 

Here are a few reasons why you should enlist the services of a Licensed Insolvency Trustee if you’re contemplating debt settlement:

  • They’re qualified. LITs are specialized professionals and are specifically trained to provide helpful advice on various types of debt solutions. These professionals must be licensed by the Office of the Superintendent of Bankruptcy (OSB) in order to practice, so you can rest assured knowing that you’re getting expert assistance.
  • They’re regulated. LITs are the only federally-regulated debt professionals in Canada. They work within the Bankruptcy and Insolvency Act of Canada (BIA) to ensure that your rights as a consumer are protected. LITs are the only professionals granted permission to administer insolvency proceedings to discharge you from your debt, including consumer proposals and bankruptcies.
  • They provide a wide range of options. LITs can provide you with a variety of options to help you eliminate your debt. They can help you choose the best solution for your situation.  
  • They deal with creditors on your behalf. LITs negotiate with your creditors to come up with an alternative payment arrangement that you can afford to avoid bankruptcy. Otherwise, they’ll help you file for bankruptcy after all other forms of debt settlement have been exhausted.
  • They help protect you from costly repercussions. Once you choose some form of debt settlement, your LIT will notify your creditors of your filing, which will stop all collection calls, threats of litigation, and wage garnishments

What’s The Difference Between A Licensed Insolvency Trustee And A Debt Consultant?

There are significant differences between LITs and debt consultants (or credit counsellors) that you should be aware of before deciding who to call for help with your debt:

Regulation And Federal licensing

LITs are regulated under the federal BIA and are required to adhere to strict rules when providing their services. On the other hand, debt consultants are unregulated counsellors, so there are fewer restrictions for them to follow.

Moreover, LITs are licensed by the OSB, whereas debt consultants do not have such licensure. 

Debt relief options

LITs are legally authorized to file consumer proposals and bankruptcies. Debt consultants, on the other hand, do not deal with these legal processes. Instead, they can only help you come up with an informal debt management plan and negotiate with your creditors.


Since LITs are federally regulated, their fees are relatively the same across the board, so there is no risk of being overcharged. Instead, debt consultants may charge a wide range of fees since they are unregulated. As such, there are very few restrictions placed on them in terms of what they charge for their services. 

How Do I Know My LIT Has My Best Interests In Mind?

Legally, LITs must administer the legislation to the best of their ability and within the authority granted to them by the Federal Government under the Bankruptcy and Insolvency Act.  Trustees have a very strict code of professional conduct to follow and must be of high moral integrity. 

Since LITs are heavily regulated and bound by the legislation, it means you have the benefits and protection of those regulations.

Bottom Line

While it can be very difficult to pick up the phone and make the call to see a LIT, it is in your best interest to reach out to one if you’re struggling with your finances. A LIT can help you transform and regain control of your finances.

Licensed Insolvency Trustees FAQs

Can my LIT give me legal advice?

LITs are not lawyers and do not provide any services or advice in the way a lawyer would. Their role technically is to protect all parties involved and ensure proper duties and rules are followed not only by you but also by the creditors and any other stakeholders. Technically a Trustee does not act for the individual, but they will do whatever they can within the authority of the legislation to assist the debtor in resolving their financial difficulties.

How can a LIT help me?

A LIT can help you transform and regain control of your finances by assisting you with debt restructuring options that may or may not include bankruptcy. They’ll review your situation with you and help you identify all options available to deal with it. Sometimes those options may be less formal such as debt consolidation or refinancing. Alternatively, those options may be a legislated process such as a consumer proposal or a bankruptcy.

Is bankruptcy the only debt solution LITs offer?

Unfortunately, most individuals associate Licensed Insolvency Trustees with bankruptcy only and everyone typically wants to avoid that as much as possible. However, LITs can offer solutions beyond filing for bankruptcy, such as a consumer proposal.
Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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