If you’ve been struggling with debt and looking for a way to get out, you have likely heard of bankruptcy trustees. There are many different debt solutions out there, and it can be confusing trying to figure out who does what. In this article, we’ll explain what a bankruptcy trustee is and how they can help you.
Bankruptcy trustees, now known in Canada as licensed insolvency trustees, are professionals licensed under the Office of the Superintendent of Bankruptcy. In Canada, they are the only professionals who can administer bankruptcies and consumer proposals for individuals. Unlike in the United States, this cannot be done by a lawyer.
Who Do Bankruptcy Trustees Work for?
They are independent professionals who have a “duty of care” to all parties involved in the insolvency process, including the debtor and their creditors. They are officers of the court held to a higher standard by law than other types of debt advisers. They are not government employees, and they don’t work for creditors either. They usually work with firms like Debt Help BC.
Individuals do not “hire” licensed insolvency trustees, but they do choose who they want to work with. Initial consultations should be free. They provide a debt assessment and review your particular financial situation, helping you to understand your position and find a solution that is both likely to succeed, and that does not involve unnecessary costs and fees. This is an obligation that non-licensed debt counsellors do not have. When you work with the experts at Debt Help BC, we make sure that you are fully informed and that you can get the right solution.
What Do Licensed Insolvency Trustees Do?
Licensed insolvency trustees administer bankruptcies and consumer proposals, provide credit counselling help for those going through the insolvency process, and provide consultation and advice on other bankruptcy alternatives like debt consolidation and settlement.
To find out if you are eligible to use bankruptcy services in Vancouver Island, call us for a consultation. You can file for bankruptcy in British Columbia if you owe at least $1,000 in unsecured debt, you are unable to pay those debts, you have ceased meeting your obligations, or the amounts you owe exceed the realizable value of your assets. The same eligibility applies to consumer proposals.
Why Are There Bankruptcy Trustees?
Debt relief mechanisms exist because some people get into a position where they are unable to meet their obligations to repay borrowed money. Relief has been part of the history of debt for thousands of years. Modern debt relief has taken the form of bankruptcy. In the 1990s, consumer proposals were introduced as an alternative to bankruptcy ideally for individuals who couldn’t meet all of their obligations but still earned enough income to make some payments.
There are many different reasons people become overwhelmed by debt, including job loss, loss of income due to medical leave, unexpected expenses, divorce and separation, and poor use of credit. Debt relief measures are available to honest debtors who find themselves unable to pay back their creditors in full. The reasons don’t matter.
Licensed insolvency trustees are there to help individuals get relief while ensuring that creditors are able to recuperate some of their costs.
Consumer Proposals vs. Bankruptcy
You need debt help, but you’re not sure which option is better for you. You can book a free consultation with Debt Help BC and talk to a professional about which option works. Everyone’s situation is different, so it helps to have someone take a non-judgemental look at your personal finances and explain all of the solutions available to you.
There are several important differences between these two types of relief.
#1 Your Assets
A consumer proposal does not involve any of your assets. In bankruptcy, any non-exempt assets can be used to settle your debts with creditors. In British Columbia, there are exemptions up to a limit for household goods, tools of the trade, a motor vehicle, insurance investments, and home equity. RRSP investments made more than 12 months before filing are also protected.
#2 Your Income
Instead of using your assets to help creditors recoup their money, in a consumer proposal, you make a set monthly payment. This payment does not change even if your income does. Payments can last for up to five years. You do have the option of increasing payments to get out of your consumer proposal earlier.
A portion of your income can also be used to repay creditors in a bankruptcy. A bankruptcy takes 9 to 21 months to complete before you are discharged. In that time, if you earn what’s called surplus income, you are obligated to pay a percentage of it to your creditors. The limit is increases based on the size of your family. For a single individual, the limit is $2,243 per month in 2020. Beyond that, you must pay half to the bankruptcy estate.
#3 Your Creditors
Do your creditors have a say? In a consumer proposal, your creditors vote on whether or not to accept the terms of the proposal. If the majority (weighted by how much you owe them) reject the proposal, you may be able to revise the amount you are willing to pay or the timeline in which you will pay it.
Your creditors cannot reject bankruptcy. This is why it’s often seen as a last resort. If you have more questions, check out our bankruptcy FAQ for more answers.
Bankruptcy trustees in Victoria and Vancouver Island also provide credit counselling as part of their services. They help you with budgeting, understanding and fixing your credit, money management, and identifying financial danger signs so that you do not have to go through insolvency again.
A bankruptcy trustee helps you find a solution that works. They are licensed, regulated, and held to a high standard of responsibility. Book a consultation if you are struggling with debt.