Only licensed insolvency trustees (LITs, formerly known as trustees in bankruptcy) can administer proposals and bankruptcies under the Bankruptcy and Insolvency Act (Act). No other type of advisor or professional can carry out this role.
Some lawyers have specialization in insolvency law and can provide financial advice, but they are not able to file bankruptcies or proposals under the Act.
It is important to be wary of individuals or businesses that purport to provide proposal or bankruptcy services.
We see too many unlicensed companies that provide bankruptcy and proposal “advice” but cannot administer bankruptcy and proposal files and have to refer debtors to LITs to carry out administrative duties. Debtors may end up paying for this unnecessary service. These companies are not regulated by the Federal Government.
We suggest the following ‘rules’ to find a LIT:
- The firm must have the “LIT” designation. If they do not, then they cannot file proposals or bankruptcies. LITs are recognized by the Federal Government as experts in insolvency;
- The main office should be reasonably close to where you live or carry on business. For example, it can be frustrating if the LIT’s main office is in London when you live in Toronto;
- Word of mouth is the best way to find a LIT, but many feel uncomfortable to disclose their financial situation to others;
- Google reviews can be a good way to find a LIT in Toronto or surrounding areas, BUT, the reviews can be very misleading and in some cases may be offside in relation to advertising regulations of the Competition Bureau of Canada. Some post fake positive reviews (known as ‘astroturfing’) on google. As a general rule, if a LIT has many 4 and 5 star reviews (especially if there are more than 50 or so), they should be viewed with a great deal of suspicion!
- The Office of the Superintendent of Bankruptcy has an online directory of LITs across Canada.
Ultimately, you must feel comfortable with the LIT because you will be working closely with them to arrive at plan to become debt-free.