Licensed insolvency trustees (formerly known as trustees in bankruptcy) have a multi-faceted role in the fields of consumer proposal, personal bankruptcy, and corporate insolvency. Because the debt management process is quite complicated, trustees have to go through years of training to get their trustee license from the Government of Canada to consult, administer, and file your insolvency, as well as represent you to your creditors.

Trustees are appointed in every bankruptcy and proposal proceeding filed in Canada under the Bankruptcy and Insolvency Act. Most often, we’re appointed by the Office of the Superintendent of Bankruptcy as a result of filing a bankruptcy or proposal on behalf of an individual or a company. Sometimes, we’re appointed by the court to handle a bankruptcy claim.

We are responsible for managing the entire process and ensuring that everyone involved follows the rules and complies with their duties and responsibilities under the Bankruptcy and Insolvency Act.

Who Does a Licensed Insolvency Trustee Work For?

In one sense, we work for the people and companies who come to us for debt solutions. They are our clients, and we help them through the debt consolidation, consumer proposal, or bankruptcy procedure.

However, bankruptcy laws actually define our role as officers of the bankruptcy court. Although we are helping the individual or company through a bankruptcy proceeding, we are not allowed to act as an advocate for that person or company.

In other words, we’re not lawyers in the sense where a lawyer would argue for you in court. We are there to represent you to the judge by way of filing documents on your behalf, and proving that the statements and/or documents we filed on your behalf are true.

In fact, if it’s discovered that someone has not been completely truthful with us, their file is immediately referred to the bankruptcy court, where the judge will determine whether they should be discharged or released from their debts. If someone is found to have acted improperly, such as intentionally failing to disclose assets, we’re expected to refer the matter to the Royal Canadian Mounted Police Commercial Crime Unit for investigation.

This is why it’s imperative to be completely honest and forthright with your trustee. If you choose to hide something from us that has to do with your bankruptcy, we can’t protect you. That’s the significant difference between a trustee and a lawyer.

So although we’re here to help you through a difficult process, we remain completely impartial as officers of the court. But as trustees, we truly want to guide you on the path to financial health.

How Can a Bankruptcy Trustee Help Me?

Fortunately, the vast majority of people we see are honest individuals who, for various reasons, find themselves financial trouble. Maybe they got behind in bills due to an unexpected interruption in income, found themselves spending beyond their means, or just forgot to make a loan or credit card payment and became overwhelmed in accrued interest. The reasons don’t really matter. What matters is that they recognized that they needed help and sought it out.

If you have insufficient income to meet your minimum debt obligations, we can usually help you reorganize your finances so you can make a fresh start. Although that sounds easy in theory, there are some certain realities you need to be aware of that cannot be changed:

• The process might not be cheap
• This process may not allow you to keep your house or car
• You can only own and retain what your income affords

Remember, there is no legal system that allows you to keep all your assets and be absolved of all your debts.

Trustees are here to explain to you the insolvency system, how it works, and whether you are insolvent. If you are not insolvent, you should not be filing a bankruptcy or proposal.

For example, if you have a house worth $400,000 with no mortgage and also have $50,000 of income tax debt, you cannot be considered insolvent and Canada Revenue Agency (CRA) should be repaid in full.

If you are a candidate for a proposal or insolvency, a good trustee will:

• Always be honest with you about what to expect before, during, and after the insolvency period
• Present all possible debt solutions and scenarios to you so you can make an informed decision as to how to proceed
• Try to protect as many of your assets as possible when putting together your solutions

An honest, professional trustee will never try to talk you into filing for bankruptcy. We’re obligated by a strict code of conduct to present all of your available debt relief options so you can make the best decision that gets you back on solid financial footing.

Determining Assets and Debts in a Bankruptcy

Another big part of the trustee’s role is to help you assemble the necessary information so we have a clear picture of your financial situation. This includes looking at every aspect of your debts and assets so all of the information is transparent, above board, and calculated properly.

For example, I recently had an individual speak to me about settling an income tax debt of approximately $80,000. He came into the office convinced that he needed a consumer proposal. The problem was he worked seasonally, and when I asked him how he knew he owed that amount, he said a previous trustee had “determined” it. Because he hadn’t filed for income tax for a number of years, the Canada Revenue Agency wasn’t even aware of it!

I advised him that his first task was to assemble the necessary information to file the outstanding returns. Until the tax returns were filed and assessed, we couldn’t know his actual debt and proceed with a debt management solution.

In addition to your debts, we also need to have full information on your assets, such as your home, cottage, and investments (including RRSPs). Once we have all of your information, we can determine how to best handle your situation, and also calculate how much the bankruptcy will cost.

Trustees are here to help honest people through a bad time in their life so they can start over again financially. Being a licensed insolvency trustee is a rewarding occupation. As always, I’m happy to answer any questions about my role in helping you improve your financial picture.

Robert Charles, B.A., CIRP, Licensed Insolvency Trustee, is the founder of Charles Advisory Services.

For every debt problem, there’s a debt solution. Since 2006, Licensed Insolvency Trustee Robert Charles and his team at Charles Advisory Services have helped individuals, families, and businesses in Toronto move beyond debt towards financial health. Contact us today for a free consultation.

TIP: Try to avoid dealing with debt consultants who aren’t actual licensed insolvency trustees. These people will look at your financial picture for a fee and advise on possible solutions for a fee before referring you to an actual trustee. Many actual trustees, including me, will give you that same consultation for free. Save money by coming directly to us.