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Bankruptcy Trustees, those that help Canadians file bankruptcies and consumer proposals are now to be referred to as Licensed Insolvency Trustees (LIT). On April 1, 2016, the Office of the Superintendent of Bankruptcy Canada implemented this change because Trustees, on average, oversee the filing of more consumer proposals. Furthermore, Trustees often help individuals learn to manage their debt issues on their own.  

Therefore the new title is more representative of what a Trustee’s job entails. The word insolvency better represents the debt restructuring services available to Canadians through these Trustees. While the word licensed is meant to provide Canadians who are looking to file bankruptcy or a consumer proposal with the peace of mind that they are working with a professional, it also makes these Trustees more easily identifiable.

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. 

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 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 to obtain one’s license is very involved and requires discipline and knowledge.  

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, access 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.

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.

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.

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.

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.

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.

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.

Caitlin Wood avatar on Loans Canada
Caitlin Wood

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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