3 Scary Sounding Things About Licensed Insolvency Trustees
Fear Statement #1: A Licensed Insolvency Trustee doesn’t work for you, he or she works for your creditors.
This statement bothers me every time I hear it! To say that a Licensed Insolvency Trustee (LIT) works for one party suggests that he or she works against someone else. The above fear statement is meant to lead you to believe that the LIT is working against you and therefore you need to be represented by someone who will stick up for you and protect your rights. If you’ve done something fraudulent or illegal, I will be the first to refer you to a lawyer, but if you are like 99 percent of the consumers I meet every day, you are an honest but unfortunate debtor who doesn’t need a lawyer.
The simple fact is the LIT does not act for any one party but instead has a duty to all stakeholders in an insolvency proceeding, including the debtor (the person who owes money), the creditors, the Office of the Superintendent of Bankruptcy (the regulatory body that oversees insolvencies filed in Canada) the Court, when it is involved, as well as other affected parties, as applicable. Rule 39 of the Bankruptcy and Insolvency Act, which is contained in the Code of Ethics for Trustees, requires a n LIT to be honest and impartial, which is defined by Collins Dictionary as “not prejudiced towards or against any particular side or party; fair; unbiased.”
Clearly, an LIT doesn’t work for the debtor either, but an LIT provides such invaluable help and relief that most people feel like they’ve had a positive life-changing experience. The reality is there are many ways that an LIT helps, starting with providing a free, confidential information session to individuals looking at their options.
Fear statement #2: A Licensed Insolvency Trustee will always encourage you to go bankrupt.
If my profession was about encouraging people to go bankrupt I never would have put in the time it takes to earn a license as an LIT! Plus, LITs are too dynamic, creative, educated, well-trained and experienced to be so one dimensional.
Directive 6R3 of the Bankruptcy and Insolvency Act sets out the comprehensive information to be discussed with a debtor who is considering their options, and it requires that an LIT discuss the formal (bankruptcy and proposal) AND informal options (consolidation loans, informal debt management plans, etc.). When dealing with a debtor who is insolvent, the LIT is required to determine if a consumer proposal is a viable option, as an alternative to bankruptcy. According to government statistics, proposals comprised exactly 50 percent of formal insolvency proceedings filed by consumers in 2016. Clearly, LITs helped half of all insolvent debtors avoid bankruptcy in an formal insolvency proceeding. And only an LIT can administer a formal proposal to creditors, despite misleading advertisements by non- LITs claiming they can help an individual file a proposal.
If you ask the LIT for his or her recommendation and they say, “I recommend that you go bankrupt,” rest assured that this is a professional opinion based on comprehensive assessment and not a pat answer. No LIT will make that recommendation lightly. But, if there are other options the LIT will let you know what those are. Nothing thrills an LIT more than helping a debtor avoid bankruptcy; in fact, we do just that every single day!
Fear statement #3: A Licensed Insolvency Trustee will disclose your confidential information.
It’s always kind of awkward when I sit down with that rare someone who grills me about confidentiality and to whom I will divulge their information – usually before I even know their last name! While I appreciate that it is very humbling and difficult to discuss sensitive financial information with anyone, rest assured that an LIT is bound by some rules and regulations around confidentiality.
Rule 40 of the Bankruptcy and Insolvency Act, which is contained in the Code of Ethics for Trustees, prohibits an LIT from disclosing confidential information to the public concerning any professional engagement, unless the disclosure is 1) required by law or 2) authorized by the person to whom the confidential information relates. The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) imposes Rules of Professional Conduct on its LIT members, and Rule 5 provides that a member has a duty to confidence to a client and shall not disclose or exploit any information obtained in the course of an engagement. Moreover, there are provincial and federal laws respecting the protection of personal information, and most organizations have written policies regarding the same.
At the same time, certain information must be shared with certain parties in a bankruptcy or proposal proceeding, particularly with the Office of the Superintendent of Bankruptcy and creditors of the debtor. The LIT will let you know what information will be shared, and with whom. As I like to say to people, I am far too busy to go sharing your information with third parties when I don’t have to!
If you hear or read the above fear statements, ask yourself what the individual or entity has to gain by making such statements, and what they are selling. Chances are they want you to avoid seeing an LIT – even when it will benefit you – because they want to sell you something that they have to offer. In many cases, what they are selling will lead you directly to an LIT anyway.
An LIT is an educated, highly trained and strictly regulated professional. They are the only professionals who can legally administer bankruptcy and consumer proposal proceedings. To find out more about how an LIT can help you or someone you know, contact MNP for a free consultation.
Clearly, an LIT doesn’t work for the debtor either, but an LIT provides such invaluable help and relief that most people feel like they’ve had a positive life-changing experience. The reality is there are many ways that an LIT helps, starting with providing a free, confidential information session to individuals looking at their options.
Fear statement #2: A Licensed Insolvency Trustee will always encourage you to go bankrupt.
If my profession was about encouraging people to go bankrupt I never would have put in the time it takes to earn a license as an LIT! Plus, LITs are too dynamic, creative, educated, well-trained and experienced to be so one dimensional.
Directive 6R3 of the Bankruptcy and Insolvency Act sets out the comprehensive information to be discussed with a debtor who is considering their options, and it requires that an LIT discuss the formal (bankruptcy and proposal) AND informal options (consolidation loans, informal debt management plans, etc.). When dealing with a debtor who is insolvent, the LIT is required to determine if a consumer proposal is a viable option, as an alternative to bankruptcy. According to government statistics, proposals comprised exactly 50 percent of formal insolvency proceedings filed by consumers in 2016. Clearly, LITs helped half of all insolvent debtors avoid bankruptcy in an formal insolvency proceeding. And only an LIT can administer a formal proposal to creditors, despite misleading advertisements by non- LITs claiming they can help an individual file a proposal.
If you ask the LIT for his or her recommendation and they say, “I recommend that you go bankrupt,” rest assured that this is a professional opinion based on comprehensive assessment and not a pat answer. No LIT will make that recommendation lightly. But, if there are other options the LIT will let you know what those are. Nothing thrills an LIT more than helping a debtor avoid bankruptcy; in fact, we do just that every single day!
Fear statement #3: A Licensed Insolvency Trustee will disclose your confidential information.
It’s always kind of awkward when I sit down with that rare someone who grills me about confidentiality and to whom I will divulge their information – usually before I even know their last name! While I appreciate that it is very humbling and difficult to discuss sensitive financial information with anyone, rest assured that an LIT is bound by some rules and regulations around confidentiality.
Rule 40 of the Bankruptcy and Insolvency Act, which is contained in the Code of Ethics for Trustees, prohibits an LIT from disclosing confidential information to the public concerning any professional engagement, unless the disclosure is 1) required by law or 2) authorized by the person to whom the confidential information relates. The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) imposes Rules of Professional Conduct on its LIT members, and Rule 5 provides that a member has a duty to confidence to a client and shall not disclose or exploit any information obtained in the course of an engagement. Moreover, there are provincial and federal laws respecting the protection of personal information, and most organizations have written policies regarding the same.
At the same time, certain information must be shared with certain parties in a bankruptcy or proposal proceeding, particularly with the Office of the Superintendent of Bankruptcy and creditors of the debtor. The LIT will let you know what information will be shared, and with whom. As I like to say to people, I am far too busy to go sharing your information with third parties when I don’t have to!
If you hear or read the above fear statements, ask yourself what the individual or entity has to gain by making such statements, and what they are selling. Chances are they want you to avoid seeing an LIT – even when it will benefit you – because they want to sell you something that they have to offer. In many cases, what they are selling will lead you directly to an LIT anyway.
An LIT is an educated, highly trained and strictly regulated professional. They are the only professionals who can legally administer bankruptcy and consumer proposal proceedings. To find out more about how an LIT can help you or someone you know, contact MNP for a free consultation.
